You Need to Invest

“Count the perma bears on the Forbes 400 list or the amount of pessimists who run companies in the

Fortune 500. You will find none.”

– JOSH BROWN

I CANNOT IN GOOD conscience write an entire book without including at

least one top 10 list.

So let’s start the Conclusion with a list of 10 ways to lose money in the markets:

1. Pretend you’re smarter than the market. Investing is easy!

Outsmarting the market isn’t that hard. Surely, you’re more intelligent than the collective wisdom of millions of other investors, right? How hard can it really be to beat the market? 2. Try to time the market. Think and act in extremes. Go all in when it

feels like the market is in a good place. Get out of the market when things seem dicey. Keep jumping in and out until you are poor. Anyone can do it. 3. Chase performance. Follow the herd. Invest with the star fund manager

after the financial media falls in love with them. Follow fads. Take tips on the hottest stocks. Listen to the latest recommendation from your brother-in-law because he bought that one stock that went to the moon. 4. Fight the last war. Hedge the big risk that just happened. Buy the Black

Swan fund after the huge crash just occurred. Invest in that inflation hedge after prices have already skyrocketed. Make the decisions you wish you would have made before you lost money. Driving in the rearview mirror feels safe so it should work just fine. 5. Take investment advice from billionaires. So what if billionaires have

more money than you, constantly change their positioning and say stuff they don’t really mean on financial television? And sure, they have no idea what your risk tolerance is and often change their minds on a dime, but they’re billionaires! What’s the harm in buying some puts just like George Soros or Stanley Druckenmiller? 6. Invest only in the recent best-performing asset class. Who cares about

diversification when there is always one asset class, strategy or sector outperforming? Spend your days second-guessing why you don’t have more money invested in the asset class with the best short-term performance. Take all of your money and invest it in the best performer each year. The only thing that matters is three and five-year performance numbers. If that doesn’t work, buy the next one that comes along. Buy high, sell low and repeat until you’re broke. 7. Live and die by the short run. No one has time for the long run. The

sure path to riches in the markets comes from following every economic data point, earnings release, headline, financial news story and insane social media conspiracy theory you can get your hands on. You need to stay on top of this stuff so you can overreact in real-time. 8. Sell all of your stocks in a bear market. Bear markets are far too

painful to ride out. After the market takes a nosedive, sell your stocks and wait for the coast to clear. How hard can it be to pick bottoms? Volatility is scary. Change your portfolio constantly. Abandon your asset allocation, diversification be damned. There is no time for critical thinking. Panic first, think later. 9. Try to get rich overnight. Forget your goals. Delayed gratification is for

losers. Take as much risk as possible to create wealth in the shortest amount of time possible. Investing is boring. Speculation is where it’s at. Trade zero-day options, gamble, shoot the moon and day trade your way to riches. 10. Don’t invest in anything. Vanguard’s legendary founder Jack Bogle was

once asked how investors should deal with the ever-present uncertainty involved in the world. His response was simple yet brilliant:

Well, you can only control what you can control. I think whatever your

view of the world is, you have to invest. [. . .] The only way to guarantee you will have nothing at retirement is to invest nothing along the way. So, you have to take your chances.

Yes, risk exists in the markets. It’s never going to be easy. But the alternative for stepping out into the unknown is the known of never building wealth in the first place. Don’t invest. Don’t save. Allow fear to control your financial decisions. Stay far away from the markets. That’s a great way to ensure that your future self will be severely disappointed in you.

Even a mediocre plan is better than none.

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There is a seemingly never-ending list of bad things that could happen to you as an investor. I’ve covered a wide range of them in this book. The true essence of investing lies in trade-offs.

When he was considering leaving a high-paying job at a hedge fund in the 1990s to start an online bookstore, Jeff Bezos used a regret minimization framework to make his decision:

I wanted to project myself forward to age 80 and say, ‘Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.’ I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision.

This same idea can be applied to your investing process. Some investors will regret missing out on huge gains while others will regret taking part in huge losses. Which regret will wear worse on your emotions?

How should you invest?

In every investment cycle, there comes a point where investors collectively lose their minds and insanity rules the day. During a bull market, greed is the emotional lead dog which causes investors to take far more risk than they should. During a bear market, fear takes a turn at the wheel and causes investors to panic sell.

Keeping your wits about you when others are too high or too low is not an easy task. Building a durable portfolio comes down to understanding your risk profile and time horizon, but your perception of risk constantly changes depending on the environment.

If I had to boil down investing to two simple questions, here’s what I would ask:

1. When do you need the money? 2. How much can you afford to lose in the meantime, both psychologically

and financially?

Every other decision stems from these two questions. The problem is that even if you can determine the answers, it’s difficult to maintain the same attitude towards risk when markets and emotions are constantly changing. This is why you base your investment decisions on your goals, not the headlines.

As you benchmark your investment progress along the way there is only one question that matters:

Are you on track to reach your financial goals? That’s the biggest risk for every investor, both large and small. What’s important to recognize is that risk and reward are attached at the hip. If you cannot deal with uncertainty and volatility, you should expect to earn lower returns. If you desire higher returns, you need to become comfortable with drawdowns and unexpected events vaporizing a piece of your portfolio on occasion.

If there’s one lesson this book hopes to leave you with, it’s that risk cannot be avoided – it’s something you have to manage, understand, and ultimately respect. The market will continue to deliver recessions, crashes, inflation, euphoria, depression and everything in between. The investors who win over time aren’t the ones who predict these events – they’re the ones who persist through them.

Your reward for staying the course – through the noise, the volatility, and the self-doubt – is the slow, quiet magic of compounding. Survival is the key to building wealth over the long run.

The real secret of investing, as it turns out, is no secret at all. It’s the willingness to accept that pain and progress are two sides of the same coin. It’s having the courage to hold when others sell, the humility to admit what you don’t control and focus on what you do.

You don’t need to outsmart the market. You just need to outlast it. As this book has shown time and again, the reward is worth the risk.