Banjo Smyth

You are probably asking what does running a marathon have to do with Investment Strategies & Wealth Creation? For most people the answer would be NOTHING but for me the answer is EVERYTHING.

11 months ago I decided to fulfill a lifetime dream and complete a marathon. I have always been an active person and generally go for a couple of 4-6km jogs a week - a long way off the somewhat ridiculous figure of 42km that the marathon is. I see the marathon as the ultimate physical test, something that will push you into areas and feelings that you have never experienced before.

This is where I see the similarities to Investing and Wealth Creation. When you are beginning your journey towards financial freedom you are faced with ideas and concepts that are totally foreign to you. Dealing with the Stock Market, buying Real Estate to rent out and going into debt to create wealth are all concepts that are incredibly scary to someone that hasn’t experienced then before. Just like with the marathon these foreign ideas force you to choice one of two things. . . .

When your legs start hurting or you mind is getting confused you can either

Give up and stop running or stop learning about Investing

Or

You can keep going despite the fact that you feel completely spent, exhausted, confused and angry.

There is nothing better than going on a long run and getting to the point where you feel like you have to stop but you somehow manage to persuade yourself to keep going and finish. In that moment you have conquered the part of your brain that says “I can’t do it”. You have learnt that if you push through the pain barrier or that overwhelming feeling you get when learning about investing – you will succeed.

So after 11 months of training I am now only 4 weeks away from the Melbourne Marathon. 3 months ago I completed a half marathon (1:41:30) - 3 ½ minutes faster than my goal time. Since then I have slowly been building my long runs up and last weekend I completed a 35kn run in 3:15:00. My main goal for the marathon is to finish but I would love to do it in less than 4 hours. 4 weeks to go and I will let you know how I went.

When I tell people that I am doing a marathon they all tell me I’m completely crazy. To be honest I agree with them and that is the beauty of doing such a silly thing like running a marathon. It is such a long way to run that if I can finish it, surely I can do whatever I set my mind to?

The old saying that ‘Knowledge equals power’ is simply not true. The correct saying should be

‘Knowledge that is ACTED upon equals power’

The difference in these two statements is massive. No matter how much knowledge you have on a certain subject it doesn’t equate to anything unless you use this knowledge to take the relevant action.

If you have an amazing knowledge of Investment Strategies but you forget to actually implement this knowledge then you aren’t going to receive the true benefits or power that deserve to be associated with this knowledge. Now this may sound very simplistic and basic but you would be amazed at how many people have great knowledge that they never put into action.

Human beings have a terrible habit of underestimating their ability and knowledge. We also have a bad habit of wanting to know everything about a subject before we actually put it to use. I can tell you now that if you keep waiting until you know everything then you will never actually start.

READY FIRE AIM

This is one of my favorite sayings. Too many people spend too much time Aiming and forget to actually Fire. The best way to get things happening is to fire and then start worrying about the aim.

So am I suggesting that you start gambling with your money on the Stock Market with Strategies that you don’t properly understand?  Of course not but I am suggesting that your start trading on the Stock Market with Fake money. Paper trading is one of the best ways to learn as a Stock Market Investor. So once you learn a new Stock Market Investment Strategy you should start to paper trade and see how you go. If your aim is a bit off then readjust some things and try again. My main point is DON’T wait until you know everything before you start implementing your knowledge.

‘Knowledge is too precious to not use it’

Does Ready Fire Aim mean that you shouldn’t do loads of research and preparation? Not at all. You should be very thorough in your preparation but not so thorough that you never get to put this knowledge into action.

It is a common misconception that once in a lifetime opportunities only come around ‘once in a life time’. The reality is that we can create our own once in a life time opportunities every single day. We simply need to implement our knowledge by taking proactive action.

Does this sound familiar?  Isn’t it interesting that the common perception amongst the public is that investing is way too risky ?  What’s even more interesting is that if you asked any poor or middle class person how they thought the Rich made their money almost all of them would include ‘Investing’ in their answer.  So if poor people know that wealthy people are ‘Investors’ then why on earth do they believe that it is too risky for them to get involved?

The answer is simple

Humans are terrified of anything that they don’t know or understand.  In the immortal words of Garth from Wayne’s World “We fear change”.

So am I saying ‘Investing is not risky?’ Not at all, in fact if you don’t understand it or aren’t properly educated Investing is incredibly dangerous and risky.  But the same can be said about almost every daily activity that we undertake.  Whether it be swimming, crossing the road, riding a bike, driving a car or even eating a chicken wing – all of these activities would be highly dangerous if we hadn’t been taught or shown how to do them properly.  Luckily for us our parents took us to swimming lessons when we were children but unfortunately for us our parents never seemed to take us to Investment school.  Instead they taught us what their parents taught them about Money & Investing - and that was “to earn money you need to work hard”

Well I’ll tell you now that if you want to become financially successful and a master of wealth creation you will need to step out of your parents shadows and learn that ‘Rich people don’t work for money, they let their money work for them’.

I was first introduced to this concept in high school when I read ‘Rich Dad, Poor Dad’ but it wasn’t until a few years later that I truly understood the concept of having your money work for you. 

When I finished university I decided I wanted to travel the world for 6 months so I began working my backside off to try and finance the trip.  Whilst I was confident of my saving ability in the back of my mind I knew that I could always fall back on some money that my granddad had given me in the previous year.  As an early inheritance he had invested $7k (plus $3k of my own savings) into some shares that I knew very little about (other than the fact that if my ‘overseas trip fund’ was running low I had a backup plan).

To cut a long story short I managed to have the most amazing trip without eating into my Granddads shares.  But more importantly when I was overseas I met a fellow Australian traveler who was funding his trip by trading the stock market in internet cafes all over Europe (earning between $5-$15k per month).  Needless to say my interest in the Stock market suddenly grew and as soon as I got home I decided to see how my own shares were going.

Well to my great surprise the $10,000 that had originally been invested had now grown to $16,000.  So whist I had been climbing the Eiffel Tower and watching the Aurora Borealis in Norway my money had been hard at work.  What an amazing and life changing feeling!

 So how can you learn to make your money work for you?

Well as I found out this question is harder to answer that you might expect.  After learning about my shares success I couldn’t help myself from telling everyone I knew but for some strange reason no one seemed to share my enthusiasm.  All everyone could say was “be careful, the stock market is very risky’ or they would tell me stories about how their ‘nephews, cousins, friend had once lost all their money on the stock exchange’.  At this stage my head was starting to hurt and I didn’t know who or what to believe.  Just recently I found a great quote by Kurek Ashley that summed up the position that I was in perfectly:

“The most expensive advice you will ever get, is free from poor people”

If you look at what this quote really means you will be able to understand why the average person believes that investing is too risky.  It is simply because your typical ‘poor to middle class’ person is receiving their advice from a fellow ‘poor to middle class’ person.  Surely this is a case of the blind leading the blind, or at best the blind leading the severely visually impaired. 

If your child wanted to be a professional gymnast and you knew nothing about gymnastics what would you do?  Obviously you would find the best Coach/School and you would let them teach your child.  Well the same principle applies if you want to be financially successful.  You need to find Mentors, books, DVD’s, Seminars anything or anyone that knows more about Wealth Creation than you do and gradually build up your knowledge.  Then eventually like a professional surfer glides over the waves you can successfully let your money work for you rather than drowning in an ocean of uncertainty and risk.  As Warren Buffet once said “Risk is not knowing what you’re doing”

So you are now faced with a few options

1. Not invest and spend the rest of your life ‘working for money’
2. Invest your hard earned money before you are educated enough, loose  your life savings and in turn become one of those people who tell everyone else that “Don’t invest, it’s too risky, the stock market stole everything I had”
3. Or you can dedicate yourself to learning about Investment strategies and techniques and gradually build up your confidence until  you become a successful Investor and let your money work for you.

So are there risks with Investing? YES of course there are, but like swimming, crossing the road, riding a bike and driving a car once you educate yourself you lower these risks and in turn get to enjoy the wonderful benefits.

Surely NOT investing is the biggest Risk of all.