The Cost of Admission for Investing
Here’s a long quote from Morgan Housel, author of The Psychology of Money, with one of the best illustrations of the mentality needed for successful long-term investing in the stock market regarding normal volatility:
“Anything worth pursuing in life, that has a benefit, has a price attached to it. The world is not so great that it’s going to give you great rewards and ask nothing in return.
So, then, the question is, in investing, what is the cost of admission?
You want great returns. Everyone knows that you can earn great returns in investment markets over time.
But what is the cost of admission?
A lot of investors cannot really answer that. Or they will say something like, “the management fee that you pay to your advisor or broker.”
That’s not the cost to investing.
The cost of investing returns is putting up with and dealing with and enduring a never-ending chain of volatility and uncertainty and setback and disappointment. That’s the cost of admission.
And this is so important because most investors, when their portfolio goes down 20 or 30 percent, they view it as a fine, and a fine means you did something wrong. A fine is like a speeding ticket, you’re in trouble, shame on you, don’t do it again. That’s what a fine is.
The better way to view it though is as a fee. It’s the cost of admission. You’re like, “Look, I need to put up with my portfolio declining 20% once a year, or something like that, in order to do very well over the long term.”
That’s what the world is asking me to give up to get something on the other side.”
Fascinating AI Technology
I mentioned previously that I’m fascinated by NFT technology, and even though it isn’t ready for prime time yet (really that the killer application for them hasn’t yet been found), I’m certain the tech behind it will be world-changing.
Another area I’ve been monitoring is Artificial Intelligence (AI), and just over the past few months this tech decidedly has become ready for prime time.
From Metaphysic nearly winning America’s Got Talent with their amazing ‘deepfake’ singing videos to the mind-blowing Dall-E, Stable Diffusion and Mid Journey AIs which all are able to take simple text descriptions you input and almost instantly create astonishingly good artwork around that description.
For instance, I randomly typed in “dad and two daughters crossing a creek over a bridge” into the Mid Journey Discord app and in under 30 seconds it gave me four different options of completely original AI generated artwork.
And it certainly doesn’t stop with artwork! Here’s a great Twitter thread to explore from Alex Banks on “10 mind-blowing AI websites that you’ve probably never heard of.”
Click through to that list and prepare to be astounded by what’s happening in a world we’re all mostly unaware of!
This tech is coming, and it’s coming QUICKLY. It’s important to understand it, and then see how it can potentially benefit you in your life and business.
Financial Independence Documentaries
I wanted to pass along some new info on two FI-related documentaries:
- A new doc called “Get Smart with Money” premiered on Netflix earlier this month, featuring some of our friends and past guests including Mr. Money Mustache, Paula Pant and Tiffany Aliche. The more views, the more likely Netflix is to feature this type of content in the future, so check it out when you get a chance.
- Scott and Taylor Rieckens, creators of the documentary “Playing with FIRE” are coming back on the podcast next month to update us on their FI journey, as it’s been over 5 years since they originally found the FI community and dove in deep. If you haven’t watched the doc and you’re new to the community, I think it’s a highly valuable use of time.
ChooseFI Community Taking Action This Week
- Kimberly said, “Your recent episode on student loan forgiveness (ep 391) was fantastic. I recently had $34,000 in loans forgiven under the PSLF waiver. I’ve been telling everyone I know about this but a good number of folks don’t seem to think they qualify. So I will be passing along this episode, as it helps demystify the options in a way that I could not.”
- Christine said, “My 1% that I wanted to share was on using points for travel. Recently came back from a trip to Europe where 4 of nights were paid using Marriott points at a 4-star hotel. The other 5 nights were a combination of Chase and American Express points at one 4-star hotel and two 5-star hotels. We saved over $6K on hotel stays for this trip. We also flew Business Class on British Airways and paid only $1500 a person round trip from AZ to London on $4000 seats using the BA Companion Pass that I get rewarded every year for spending $30K on my BA Visa card each year (which is easy to do when we literally put all our expenses on credit cards–responsibly, of course). With the use of points, we traveled luxuriously and still saved over $11K!”
- Michael said, “My 1% better is a small one, but a direct result of listening to the podcast. I have a second bank account that I use to fund a brokerage account. I accidentally overdrew this account and a $30 fee was assessed. I spent less than a minute and crafted a humble and polite email asking for the fee to be refunded. The response from the bank thanked me for my loyalty and issued an immediate refund. It feels like a bigger win than the $30.”
- Ben said, “My 1% better this week is to continue to put all work travel, accommodation, and gas expenses on my credit card. Being in a position of strength with a large cash holding allows me to be able to take on all the expenses and rapidly pay them off to gain credit card points. I’m looking forward towards putting them to travel to Australia in the next year.”
- Tori said, “This fall my son started kindergarten and we no longer have his full time daycare costs to cover since my husband and I both work full time. We have already been maxing out our 401Ks for a few years (after listening to your podcast) and will now take the equivalent daycare costs as an automated transfer into our Vanguard brokerage account. I am happy to say that we’re about 2 years away from Coast FI!!”
- Jill said, “My 1% this week is taking the time to finally calculate my annual spend and my savings rate. Happy to say I’m currently at 55% savings! And looking at my finances in more detail is helping me understand ways to increase that savings number.”