I hope you saw my colleague Mark Ford’s column this week about getting “a little bit richer every day.”
Like most, it was full of fascinating insights.
I’ve known Mark for more than 30 years, and I never fail to learn something from him, whether I’m perusing one of his many excellent books – I’m reading Living Rich right now – or just having a 10-minute conversation with him.
Mark is a guy who has learned a lot, thought a lot, traveled a lot and achieved a lot.
And he is passionate about sharing his hard-won insights, many of them wildly counterintuitive.
Read his columns here at Liberty Through Wealth and you’ll quickly discover that he is a business genius, the real deal.
It’s not just that he’s gotten rich owning lots of different businesses. He’s experienced that success – and a few failures – in lots of different industries.
Yet how he built his fortune and how I built mine could hardly be more different.
Perhaps you remember that old Saturday Night Live skit where Garrett Morris, portraying Chicago Cubs great Chico Escuela, says, “Baseball been berry, berry good to me.”
I could say the same about the stock market. It has rewarded my decades of intense interest many times over.
Yet Mark prefers private companies where he either controls the company or knows the people well who manage it.
He has largely avoided equities.
As he put it in Wednesday’s column, “I put the bulk of my retirement savings into municipal bonds, high-yielding bank CDs and unleveraged rental real estate properties… Since I made this resolution in the early 1980s, I’ve never experienced a single day of being poorer than I was the day before. Think about that.”
I did. And it reminded me what a terrible real estate investor I am.
My first rental property was a duplex I bought more than 30 years ago in downtown Orlando. It was right in the shadow of our ever-expanding hospital, and it seemed a cinch it would have to buy me out.
Of course it didn’t.
In the meantime, I received a Ph.D. in property management: termites, plumbing problems, major appliance failures, roof repairs, lawn replacement, tenants who couldn’t make the rent and – my all-time favorite – tenants who couldn’t make the rent and wouldn’t move out.
It wasn’t long before I plunked the “For Sale” sign in the front yard.
At the closing – 10 months later – I paid a 6% real estate commission, chipped in for half the closing costs and took a beating on my original investment.
Still, I could have jumped up and clicked my heels on the way out the door. Free at last!
I know plenty of folks like Mark who’ve become wealthy, in part, through real estate. But I learned long ago that property management – and managing property managers – is not for me.
(Heck, after years of property taxes, homeowners insurance, community dues, management fees, maintenance and repairs, it’s not easy to even calculate your net return.)
As for investments in municipal bonds and CDs, those are like watching paint dry to me.
For people like Mark, however, who are both risk averse and uber-wealthy, they make perfect sense.
After all, if you’ve already won the game, you don’t have to keep playing.
Mark has more money than he’ll be able to spend. (And as a man with a fabulous art collection and homes on multiple continents, he is not a small spender.)
Of course, many of us don’t have the time, the investment capital or the skills necessary to found and run a business.
And maybe that’s a good thing. Experience shows that the vast majority of new businesses fail in the first five years.
But virtually anyone can still own a piece of a thriving business through the stock market.
With a bit of due diligence and even a modest amount of money, you can accumulate a stake in any of thousands of the world’s most profitable companies.
And it’s easy. A click of the mouse – a $5 commission – and you’re in. Another click – another 5 bucks – you’re out.
Compare that with your typical real estate closing.
And owning a piece of a public company is a whole lot simpler than running your own.
You don’t have to take out loans, sign personal guarantees, hire or fire employees, grapple with an avalanche of federal mandates and regulations, pay lawyers and accountants, or even show up for work.
How great is that?
Some Americans today obsess over the issue of fairness. But the stock market shines here, too.
If you own shares of Amazon (Nasdaq: AMZN), for example, your gain over the next year will be exactly the same as the world’s richest man, Jeff Bezos.
Sure, he may own a few more shares than you do. But your percentage return will be the same.
However, the stock market requires something that real estate and super-safe investments – like municipal bonds and CDs – don’t.
A cast-iron stomach.
Over the past 34 years, every time there was a serious correction, bear market or crash, I didn’t panic. Instead I became… almost giddy.
Back when I was a Wall Street money manager, my clients often felt that I had lost my mind.
“Haven’t you seen the news?” they’d ask in horror or disbelief.
“Yeah,” I’d answer. “But look at all these great companies selling at fire-sale prices!”
Most did not concur. Except in hindsight.
As Mark’s experience and mine show, there are plenty of ways to accumulate wealth.
The trick is to find an approach that suits your particular temperament.
As the old adage has it, there are many roads up the mountain. But the view from the top is still the same.