Have you noticed? The internet makes everything look easy. Just DIY yourself a home remodel in 24 hours! Sure, no problem! Done in a jiffy! Start your online business today and you’ll be making millions in mere weeks!
Simple as pie! And that’s how the world works on the internet.
Unlike in the real world, absolutely everyone on the internet is incredibly confident, with super amazing skills and talents.
If you follow the person finance world, you’ll see these amazingly investors that never make any mistakes. Landlords with perfect tenants, and stock investors with perfect asset allocation and GIGANTIC gains. Investors that only make money.
If you ask me, the level of talent on the internet is absolutely freaking amazing! Bloody friggen unicorns! I wish I knew some of those folks! Maybe a little of that super talent could rub-off on me…
Sadly, the average person is nothing like the super-unicorns on the internet. For example — I’m just an average person that happens to be super-slow at home remodeling, and I make investing mistakes all the time.
What’s worse, I have a tendency to kick myself for those mistakes…
An Impossible Standard
The internet (of course) sets impossible standards to live-up to. This includes investing results that are impossible to achieve without taking on monumental risks.
I know all this, but I still compare and I’m hyper-critical of my own investing mistakes.
With over $3 million dollars invested you’d think I’d go a little easier on myself, but I don’t. I kick myself about every little “mistake”, even when the blunders are not truly terrible.
Take for example, my recent sale of Limited Brands (Symbol: LB) shares. I sold the shares back in June for $19.76 per share. I thought this was a very good price. Retail looked like a dying business to me, and the pandemic was likely to further disrupt the retail business for years. $19.76 seemed like a very fair price given those circumstances.
Yet here I am three months later and LB shares are over $30 per share. Dang-it! $%@#! If only I held on to those share just a little bit longer I could have made considerably more money. What a bone-head!
This is exactly what I’m talking about — Even though selling the shares was a financial win for us, I kick myself for not making that extra 50%. Why couldn’t I have timed it better?
I set impossibly high standards (financially) for myself, and beat myself up when I don’t reach those goals. It’s a really bad habit.
Knowing The Unknowable
Why do I this? Perhaps it’s the engineer in me, striving to build a perfect money making machine. After-all, I believe that one of the big secrets to building wealth is creating a cash-flow engine — a machine that cranks out wealth, rain or shine. A machine that’s immune to wild market movements, and market prediction errors. In other words, a money-machine that’s anti-fragile (like the book).
To a certain extent, I’ve succeeded at this goal. Last year our assets generated $58k in cash without me lifting a finger. This year we’ll probably break $60k when the year is finally done. This is during a pandemic, and probably the worst recession I’ll ever see in my lifetime… yet our cash generation machine has been remarkably stable.
By most accounts, we’re doing OK. Yet I kick myself for not doing better.
It’s a silly thing to do, but I see and hear other investors doing this all the time. They kick themselves for not holding onto those Apple shares from the 1990’s that would have been worth millions today.
Never mind that back in the 1990’s Apple was in terrible shape. Steve Jobs wasn’t even at Apple back then, and sales of Apple computers were slowing. The iPhone wasn’t even an idea at that point!
Then, there’s the investors who bought Amazon after the dot-com bust for $10/share, and sold after a nice 50% gain. Today those shares would be worth $2,955 per share! If only they had just held on!
Never mind that Amazon was a mere online bookseller back in those days. Most books were still being sold at physical booksellers like Barnes & Noble and Borders. There wasn’t a shred of evidence that might have indicated Amazon would eventually become a seller of everything, a movie studio, a grocery store, and even giant cloud business.
In 2020 it’s common to hear a stories about investors who sold Tesla, only making a 150% return. “Curses!” they say, “If only I’d held on longer I’d be worth millions more!”
Why do we do this to ourselves? Why do we kick ourselves, when all the information needed to make that perfect decision is completely unknowable?
Striving For Perfection
Over the years I’ve learned that perfection isn’t something you should strive for in investing. Investing isn’t like engineering — It’s not a hard mathematical equation that can be solved, or a complex system that needs to be perfectly optimized.
Investing is part art and part science. It is a skill (and you can gain some mastery at it), but perfection is NOT achievable.
So much of investing is unknowable and random. You simply can’t predict what the stock market is going to do next week or six months from now.
So don’t kick yourself for taking a few nice gains. You’re still winning! The future is impossible to predict, and the stock market can move in any direction based on the fickle mood of the market.
It’s OK to not take home a “mother load” on a investment. Smaller gains are perfectly OK. If you walked away from the table with a win, then congratulations are still in order!
Stick With Compounding
The thing is, you don’t need to be a internet unicorn investor to build wealth. You don’t have to time the market perfectly to make money either. You can still do well compounding money with much smaller gains.
Sure, you might not be taking that private jet to Madrid for Christmas, but so what? You can lead a very good life… a very good financially independent life without making yourself crazy trying to achieve perfection.
How is it done?
By simply compounding those small wins over and over — Using what is knowable and achievable to make forward progress, and avoiding the biggest blunders. Over and over again.
Yes, they might seem like baby steps compared to the monstrous gains you read about on the internet… but slow progress is still progress. Every mountain is still climbed one step at a time.