Nobody knows more about your money than you. So why do so many people turn over their hard-earned money to strangers? In this episode Tom explains how you can become a successful investor, eliminate the Wall Street-myth of diversification, and pay less taxes.
01:11 – What Causes People To Fear Money?
04:16 – How Do You Overcome The Fear Of Investing?
06:25 – Why Is Diversified Investing A Bad Plan?
12:54 – How Do Investors Determine Their “Natural Instinct?”
18:46 – How Does Investing Become Enjoyable?
This is The WealthAbility™ Show with your host, Tom Wheelwright, way more money, way less taxes.
Welcome to The WealthAbility™ Show, where it's all about making way more money and at the same time, paying way less taxes. Today, we're talking about this question, what if, what if you could take the fear out of investing and actually enjoy it instead? Today, we're going to make investing fun and enjoyable and at the same time, show you how to pay less tax.
Now, because you're listening to this podcast, at the end of the show, I'm going to give a free gift. This is a serious gift, okay? So you want to be sure to stay to the end of the show and there are actually several gifts. These are additional learning tools, so that you can learn more about what we're talking about today, taking the fear out of investing.
Think about this. What is holding you back? For most people, it is actually a fear of money. It's a fear of wealth. We all hear, “Money changes people.” We read about it in our news feeds every single day that these rich people, they're crazy. They've gone off the deep end, they do drugs, they do alcohol. I mean, life is miserable for them even though they have millions and millions and millions of dollars. So we're scared to death that we might change if we make more money or we're scared to death because we've been told all our life, we've gone to Sunday school and we've been told, “Money is the root of all evil,” or “The love of money is the root of all evil.” It's not money, folks, okay? Money is nothing. Money is just a means of exchange, okay?
Here's what's great. I love money just because I think it's fun. I think money is fun. Now, I admit I enjoy, I enjoy spending money, okay? I'm a shopper. I love Nordstrom's in San Francisco. A little plug for Nordstrom's in San Francisco, four stories of great clothes, okay? I love it, okay? I love shopping with my wife at Nordstrom's, right? I like what money is used for, okay?
Does having money change you? Absolutely. It can change you for the good or it can change you for the bad. It's your decision. Here's the thing. Making money doesn't have to be scary. It doesn't have to be something we're afraid of. It doesn't have to be something that holds us back from living the life we want to live. Remember, we want to live the life we want to live today, okay?
The reality is we can't do it without money, okay? Let's face it, okay? We can be happy without money. We can be happy with money. If you think about the life you want to live, would it be easier for you if you had the money? People go, “Yeah, but investing is serious business. I mean, it takes really smart people to invest, right?” I'm going, “Yeah. You're a really smart person.” I'm going to tell you right now. You are the smartest person in the world to invest your money. You can do this. You are the only person who cares about your money the way you do. Well, except maybe Uncle Sam, but we'll get to that.
You are the one who cares. You're the one who has the ability, okay? It's your wealth ability. You're the one who can make the difference in your life and it's not that hard. That's the whole of The WealthAbility™ Show is that it's not that hard to invest. It's not that hard to learn to invest. It's something that you can absolutely do and it's something that you can love doing. It's absolutely something you're going to love doing.
Most people don't know what they love. They don't know if they're going to enjoy investing or not. They're just scared to death of it, okay? We want to take the fear out of investing, so that we can actually enjoy it. The way we do it is we actually look at what are we going to enjoy doing, right?
Well, I love sports or I love water skiing. Lake Powell is like heaven for me. We don't think about investing as this enjoyable, this fun thing to do. The reality is if we choose the right way to invest for us, let me say that again, if we choose the right way to invest for us, then investing can be the most fun thing we do in our life. So what happens when people are afraid of investing? It's easy.
What do we do when we don't like something? We avoid it, right? That's what we do. We avoid it, okay? I don't like coming to the office, I'm going to avoid coming to the office. I don't like my ex-wife, I'm going to avoid my ex-wife, right? I don't like strenuous exercise, I'm going to avoid strenuous exercise. That's what we do. We're programmed to avoid what we don't like doing, but we don't even know what we like doing when it comes to investing.
So how do we avoid from an investing standpoint? We diversify. That's right. We go to a financial planner and we say, “Here, you take care of it,” right? We're going to avoid it completely. We're going to give it to a financial planner and say, “You take care of this. I'm not going to worry about it. It's in your hands because you're smarter than I am.” Here's the thing. Nobody is smarter than you are when it comes to your money.
Warren Buffett is not smarter than you are when it comes to your money. It's just learning how to do it. That's what we're going to talk about in just a minute is how do you do this. How do you actually take control of your investing and do something you enjoy and not be overwhelmed by it? Here's why we don't want to diversify. Warren Buffett actually said that, “Diversification is for losers,” okay?
Now, diversification is for those people who really want to avoid it. If you don't want any control over your money, if you don't want any control of your wealth and if you want no control over your success, I will tell you right now, you should stop listening to this podcast, okay? Because WealthAbilityTM is about your ability to create wealth, not your financial planner's ability to create wealth.
I'm not a big fan of financial planners as you know. So we're going to talk about how do you do it. Well, diversifying makes no sense. Think about it. When I went to a graduate school, University of Texas, I took a class on investing. They taught us about diversification. The point of diversification, ready for this? It's to not lose money. It's not to make money. It's to not lose money, okay?
If you have a billion dollars, you probably want to diversify, if you don't want to make more money. You just want to live off the earnings. You probably want to diversify. You want it safe. You don't want to lose money. Let's say that you're like me or most of us listening that what you really want to do is you want to build wealth. You actually want to be more successful when you're no longer working. You want to have more money when you're no longer working. Then you do now or you want to have the freedom to do what you want to do without worrying about money, okay?
Well, if you're going to do that, I'm telling you right now, diversification will not do it for you because diversification is about not losing money. I'll give you a story that just shocked me. I'm talking to one of the managing partners of a national CPA firm a while back. They decided that their clients kept asking them, “Would you invest for us?” They have $4 billion on their management now. I said, “So what's your target for investing?” They said, “Our goal is to not lose any of our clients' money.” I said, “Come again?” They said, “Our goal is to not lose any of our clients' money.” “So your goal isn't to make money for clients?” “Nope. Our goal is not lose money.” I was shocked. I mean, I had always thought this, but to actually hear it actually blew me away.
So what's the alternative? Well, the alternative is focus. What's the alternative to being scattered and diversifying, which is scattered, okay? What's the alternative? The alternative is to focus, okay? Well, what should we focus on? Well, we're going to focus on something that we enjoy doing, okay?
Think about this. There are four asset categories, okay? There's four types of assets. There's business, there's real estate, there's paper assets like stocks, bonds and there's commodities like oil and gas, agriculture, gold, silver. How do we decide which one to invest at? Yes. I am telling you if you're going to make investing fun and enjoyable and pay less tax, you must choose one. Do not choose two. Do not choose three. Whatever you do, do not choose four, okay? Don't say, “I'm going to do a little oil and gas over here. I'm going to do some stock over here. I'm going to some real estate over here.” Jack of all trades is a master of none. Is that really what you want? No. Let's master our trade.
Some of you have heard the 10,000 hour rule. 10,000 hour rule goes like this. We become outliers, okay? That's the name of the book, right? Outliers. We become outliers in what we do. When we put 10,000 hours or more into the Beatles, Bill Gates, Mark Zuckerberg, I mean, these guys all put 10,000 hours into their professions, right? Warren Buffett, another good example, okay? It's that 10,000 hours.
Can you put 10,000 hours in business, real estate, stocks and commodities? No, you can't, okay? You might as well turn your money over to a financial planner, seriously. If that's what you're going to do, you'd be better off not losing money because you're going to lose money if you do that, okay? So we don't want to lose money. We want to make a lot of money. We want to build massive amounts of wealth.
The way we do it is we choose one. “Do I want business? Do I want real estate? Do I want stocks? Do I want commodities?” Now, I will tell you I've tried all four. I have. For one, I thought it was important for me to try all four, but for two, I didn't always understand how to determine how to focus. I'm going to give you some hints in just a minute how to determine how to focus.
I started in stocks, actually, years ago. I decided I'm going to get my Series 7, which is at that point you can do pretty much anything from trading in the stock market. I actually went through the education. It took me about six weeks and I got my Series 7. I held it for about two weeks and I said, “You know what? I can't do this and tax and everything else I want to do because this is a specialty.” I don't like the idea of sitting in front of a computer screen all day. It, literally, would drive me crazy, okay?
I know when I'm happy. I'm happy when I'm in front of people, okay? I'm happy when I'm teaching them. I'm happy when I'm in front of people. Being in front of a computer screen does not make me happy. Commodities, oil, I'm fascinated by the whole oil business. I've invested in oil. For years and years and years, I invested in oil. Guess what? It's really complicated. It's a very complicated investment.
Now, I could get really, really good at oil. I could. I mean, I went to University of Texas. I took oil and gas law at the University of Texas. I started my career in Utah, where we did oil and gas. I understand the basics of oil and gas, but am I a professional oil and gas investor? No. It would take too much time. So I'm not, so I tried that, okay?
I tried real estate, all right? I did what everybody else did. I bought lots of good real estate in 2003, 2004, 2005, 2006 and I made the same mistakes a lot of us made is that I didn't sell it in 2007, okay? Really, I could tell it was coming down. I could tell that there was something softening, but I didn't. Real estate just keeps going up, right? No. I wasn't a professional real estate investor and it came down. My partner and I struggled just like everybody else, okay? I wasn't following this idea that I get really good at one thing.
Here's what I've learned. I love business. That's what I love. I have four new businesses I'm working on right now. I love business. They're all related, okay? They're not diversified. They're all related to the same thing. They're all related to WealthAbilityTM. Why? Because I know that I love business. Now, how do I know? Is there a way that I can know ahead of time? Yes. There are tools. There's actually tools we use at WealthAbilityTM, okay? There are tools we use in order to know what's our natural instinct, what's our natural instinct.
I'm going to give you one right now, okay? I don't normally do this. I don't normally just say, “Go here.” I don't know that you can use it the way we use it. If you go to kolbe.com, it's a really good resource to understand your natural instincts. Now, when we work with clients in our Tax-Free Wealth Network™, we actually help people understand how to take that Kolbe score and decide what type of asset class they should be investing in.
I'll give you a perfect example. A number of years ago, I had somebody call me up and he said, “Tom, we've been listening to you and we like what you're saying. We just have one question. Our question is, my wife is doing stock investing and I'm doing real estate. We want to make sure that we're doing the right asset class.” I'm not a big fan of husband and wife doing different asset classes. Let me start with that, but okay. Just if you're going to do one and the other do the other, that's what you decide, that's what you decide. Personally, I would have husband and wife doing the same one, okay?
They asked me this and I said, “Okay.” So I ran through Kolbe, I ran through … It took us an hour. After an hour, what was really clear is that wife should have been doing real estate and husband should have been doing stocks. They were backwards. They were wondering why they weren't being successful. It's because when we don't do what our natural instincts want us to do, we fight it.
You think about what you fight. My Kolbe score tells me that I'm going to fight too much detail. I'm going to fight it and I do. So what do I do? I surround myself with people that are really good at detail because that is not my natural instinct. I will fight it, okay? On the other hand, I love, I love, love, love personal interaction. I love constantly changing. I like innovation. I like that.
So when I'm at my best and when I'm at my happiest is when I'm innovating. I'm doing something right from my gut or I'm having a conversation, I'm doing … or I'm having a sales call or I'm teaching something that requires a lot of that innovating quick start type interaction. Some of you who know Kolbe know what I mean by quick start as supposed to stability. I surround myself with people who love stability because that's not me, okay? I'm adaptable. Stability is not important to me.
What we do is we look at these things and we go, “Okay. So if we're going to do what we love to do, would it make sense if we follow our natural instincts and focus on that type of investing, business, real estate, stocks or commodities, where we could really start to focus?”
Now, in our last podcast, we talked about criteria. We can't even get to criteria until you decided what type of asset you're going to invest in. See, here's the thing. You go, “Okay. Even within real estate, am I going to do single family homes? Am I going to do multi-family homes? Am I going to do commercial properties? Am I going to do strip centers? Am I going to storage? What am I going to do?”
Well, again, what we want to do is we want to take one that we go, “Okay. If I were doing this all the time, would I love doing it?” Now, I'm not a fan of saying, “Do what you love and the money will come.” I think that's baloney, okay? That's not going to happen. However, doing what I hate and the money will come, that's not a good idea either. So why not find something that you really naturally enjoy, that fits your natural instincts and actually decide, “I'm going to do this,” okay?
Now, I learned the hard way, okay? I learned the hard way. I tried all four of them, okay? I will say my number one would be business. Number two, actually, was the oil and gas because I'm fascinated in the whole idea of oil. Number three would be real estate. My last one was stocks. Now, my buddy, Andy Tanner, loves the stock market. He loves it, loves it, loves it, okay? It's perfect for him, the way he does it and the way he teaches it. He loves following the trends. Not me, not right for me.
So what I'm saying is, is that what's right for Ken McElroy or what's right for Warren Buffett isn't right for you. It's not right for Tom Wheelwright. So how do we take the fear out of investing? We actually find something we enjoy doing, okay? What a novel idea to actually enjoy what we do for a living, okay?
Now, I understand investing may not be your full-time job. You have a full-time job and you may love your full-time job. Why would then you turn your money over to somebody just to avoid it, when you've worked so hard for it, when you can actually spend your evening and weekends doing something you love to do? You just don't know you love doing it because you never had the experience doing it, okay?
You hear people say, “Oh, you should go do real estate,” right? I'm not saying that. I would never tell you to go do real estate, unless we are talking to each other and I'm going, “Okay. Based on what I see about you, I would say you should be doing real estate.” I would help you make that decision, but that's your decision. For me, it's business. For me to be out doing real estate all the time would be a struggle. For me doing stocks would be painful. Could I do oil and gas? Absolutely, because it's more of a business, but understand that's me.
So this is what we do. In order to not fear investing, we must spend the time at it. Now, here's the thing. Here's what happens. Guess what? When we put our 10,000 hours in, that becomes second nature to us. Running a business is second nature to me. Doing taxes, doing tax law, people go, “It's amazing what you can do from a tax standpoint.” Yeah, it is, but I've been doing it for 35 years. I love the tax law. I love it, love it, love it. I'm a total tax geek and I love that. I love that I get to explore new ways to think about this. It's so innovative for me. That's what I love about the tax law.
Most people, that's not going to be their thing. You find your thing, right? What is it? What is it that you love? What are you actually going to enjoy doing? Because don't we spend more time doing things when we enjoy doing them? It's really that simple. If we focus, if we really focus and have that target on what we're going to do, guess what? All of a sudden, investing isn't scary anymore. Investing is actually fun.
Here's what's really cool. We get good at it. We start making more money. We don't lose money on bad investments as often. We're going to still lose money once in a while, but we're not as often. We're going to reduce our risk because we're going to be in control of it. Of course, my favorite thing is our tax is actually going to go down because what does the government want? The government wants professional investors. The government doesn't want amateur investors. Amateur investors get a 401(k). That's what amateur investors get. That's the tax benefit that the government says for amateur investors, “You get a 401(k). That's it. You can defer your money or we can do a Roth 401(k) and then you don't pay tax, but you don't get to leverage. We get to control when you take the money out. We get to control how much money to put in.”
When you choose your asset classification, whether it's business, real estate, stocks or commodities, you're in control. Now, are there some of these things like if you decide on paper asset trading? If you decided to be a stock trader or a professional stock trader, would I have you have a Roth 401(k) or a Roth IRA? Absolutely, because that's the way to reduce taxes in the paper asset area. However, business, real estate, commodities, that is not the way to reduce your taxes.
There are so many great ways to reduce your taxes, but only if you're a professional investor because the government wants you to learn how to do that. We talked about the criteria last time. We're talking today about focusing on that asset class. Once you do that, you're always, you're going to enjoy what you do, you're going to spend more time doing it, you're going to make way more money, pay way less taxes and you get to live the life you want to live now. You don't have to wait to live later because you're enjoying every day and you're making money paying less taxes.
Hey, thanks so much for listening today. As an additional thank you, I want to give a special gift just to our podcast listeners to help you jumpstart your journey to building massive wealth tax-free. This is a group of not just one, but five of my top educational resources on this topic. There are several amazing, helpful PDF downloads and two training videos. These resources are not available and we don't give them away anywhere else. So get these bonuses now. All you have to do is go to wealthability.com/gift. That's wealthability.com/gift and get these gifts to jumpstart your wealth now.
You've been listening to The WealthAbility™ Show with Tom Wheelwright, way more money, way less taxes. To learn more, go to wealthability.com.