Are you an Average or Discerning Investor?

The average investor:

  • Asks someone else if a stock is a good buy/sell at $XX
  • Follows what everyone else is doing
  • Never makes meaningful gains that last
  • Buys whatever their insurance agent or relationship manager recommends
  • Wonders why he/she is unable to retire

The average investor is a victim, and easy pickings for the industry. They react to the news, follow all the best analysts, and pay through the nose for advice and services.

Yet, they can’t seem to get ahead. They will never know what went wrong, as they did whatever was asked of them.

Where are the Customer’s Yachts?

There is a favourite story of mine. A visitor to New York goes to a marina, full of magnificent boats. Deeply impressed, he was told it was the yachts of the bankers and brokers. Naively, he asked where all the customers’ yachts were.

There weren’t any. The customers paid for the industry’s boats.

The industry always pays itself first. It doesn’t matter whether you made money or not, because they have already taken their cut. The average investor is left holding the bag, having been fleeced from the start.

You are who you choose to be

A discerning investor:

  • Makes his/her own decisions
  • Knows allocation and risk management matters much more than prices
  • Doesn’t time the market
  • Uses good debt to his/her’s advantage
  • Compounds his/her time and money
  • Is financially independent at a young age

The discerning investor chooses his or her’s fate. Work and retirement is a choice, and never forced upon them. Money works for the discerning investor, and not the other way around. It doesn’t matter how much money they had at the start.

Surprisingly, the discerning investor works far less. Working long hours in the office to protect their job isn’t necessary. They make much fewer investment decisions, and spend little time monitoring the market. They don’t chase. Good investments and money follow them.

Which one are you?

4 comments

  1. I’m a lazy investor: I take my time to build wealth frugally, I don’t use leverage though I am aware of its magnification effect but I am more afraid of ruin, I am content with market returns and don’t chase alpha. I take a contrarian stance and read as widely as possible and take my time to decide – my motto is “It’s better to do nothing”.

    1. Lazy investor is the best investor. I totally agree with growing wealth frugally. Leverage isn’t for everybody, and I’m glad you are comfortable with your risk and return profile. Let’s hope we can both become truly wealthy

  2. Most HNWI and UHNWI are average investors. They can afford to be, as they spend most of their time & mental capital in areas that generate their main returns e.g. businesses or professions.

    Ironically, LNWIs are the ones who have to learn to be discerning investors.

    If only RMs & FAs can only target HNWIs & up by law, and cannot touch LNWIs. Have pure online, direct, DIY, or robos for the LNWIs instead. I think they’ll be much better off.

    The reality is that LNWIs are the low-level targets for newbie RMs & FAs to practise their live firing skills. The minority that chalk up enough kills get promoted to be allowed to join the big game hunters with HNWIs as targets.

    Majority of RMs & FAs fail to even kill enough low-level LNWIs to put food on the table, and either naturally die off or are themselves fired by their bosses.

    1. Agree. Most HNWI’s wealth doesn’t come from investments. From my understanding, because their wealth comes from their profession and businesses, they will use insurance to safeguard it. A bit here and there in investments, but the bulk will go towards insurance. Safe and totally diversified from their other interests. The fees and distribution costs are killer. But they don’t mind as they prefer safety over high returns.

      I like your language haha, killing off the LNWIs. Not an inaccurate view.

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