“Mom, I’m bored!”
“Are we there yet?”
Boredom was my number one enemy as a kid. It’s 50 years later, and I still hate being bored.
That same attitude led me out of Ford Motor Company after four short (but slightly dull) years to embrace the adventurous life of an entrepreneur.
After selling my firm to a public company five years later, at 33, I carried that same attitude over to my investing career. I call it entrepreneurial investing.
And it can be deadly, in more ways than I knew at the time.
Who could have guessed I would be touting the joys of embracing boredom?
The quest for boredom
Paul Samuelson was the first U.S. economist to win the Nobel Peace Prize. He opined on the joys of boring investing. He once said, “Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Investor extraordinaire George Soros said, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing should be boring.”
Making money while you sleep
Do you make money while you sleep? Warren Buffett does. He said, “If you don’t learn to make money while you sleep, you’ll have to work until you die.”
What does he mean? The oracle of Omaha is instructing us on the importance of generating cash flow from our assets, and not betting on speculative price appreciation on equities or crypto that can fluctuate wildly daily—or prices that are subject to the mood on Wall Street, a CEO scandal, or a war in the Middle East.
This is one reason Buffett wishes the stock market would halt trading for a decade on equities he acquires. He wants companies to focus on true value creation, not speculative stock price appreciation.
This is about making money from money, which puts you squarely in the lower right quadrant of Robert Kiyosaki’s cash flow quadrant. This is the quadrant where the lowest taxes (often zero) are paid.
Have you noticed how the wealthy seem to tolerate (even desire) lower returns? That seemed strange to me in years past. But it makes sense when you realize they’ve already made their millions.
Their goal is preservation. And they do that by generating predictable cash flow to fund their lifestyle and leave a legacy. And their risk-adjusted returns often end up higher anyway.
They don’t seek out the highest returns. Instead, they seek out predictable yields that protect them from downside risk.
Quite predictably, the assets that generate these types of predictable returns might make you yawn. They don’t make TV shows about them. Books on these topics rarely make bestseller lists. Cryptocurrency and day trading are way more fun.
Jeff Bezos once asked Warren Buffett, “Why doesn’t everyone just imitate your strategy? It’s not that hard to understand.” Buffett quipped back, “No one wants to get rich slowly.”
“Get your hands off my assets!”
My friend and fellow BPer Kevin McGuire has a retirement savings plan in his native Canada. His well-trained plan advisor dutifully manages Kevin’s portfolio. Like most managers, he prefers individual stocks. But Kevin knows this is not his safest and most profitable plan.
He had studied the benefits of boring ETFs (Exchange Traded Funds). These benefits come in the form of both predictability and performance. And they were hands-off; they require virtually no oversight. Yawn.
Kevin had a hard time convincing his advisor to move his funds to ETFs. It was an ongoing fight until Kevin finally put his foot down. He instructed his advisor to take his hands off his assets. Set it and forget it.
You see, Kevin learned the pain of betting on individual stocks years ago, watching his options in his employer seesaw up and down hourly. He lost sleep and a chunk of his life over this, and it might have cost him a good chunk of change, as we’ll see below.
Kevin also noticed his most boring real estate investments performed best. It wasn’t the shiny objects that caught the eyes of newer investors; it was long-term holds that produced steady returns.
And there has never been a better time to think about long-term holds, as I mentioned in my post about growing wealth by acquiring low-rate debt on real estate in an inflationary cycle.
So, what about you? Where can you find boring real estate investments?
The answer is quite predictable. But not always helpful.
It depends on you. What do you have access to? What gets you excited—whoops, I mean bored?
What are you knowledgeable about? Do you have more money to invest, or more time? Who are your advisors, and where do they invest? Where have you done the most due diligence?
Kevin only invests in equities and real estate that doesn’t need daily measuring. He doesn’t care what experts predict. His iPhone stock ticker app has no stocks left in it. And his former habit of checking it is a distant memory.
Here are some suggestions from my real estate experience.
- Single- or multi-family homes with long-term tenants (managed by a third party).
- Rent-to-own tenants who do their own maintenance.
- Passive investments with a trusted hard money lender or direct loans to flippers.
- Passive investments with a proven syndicator.
- Passive investments in a diversified private real estate fund.
And a dozen more options that fit your budget, lifestyle, and goals.
You can see I prefer passive investments. I’ve written about this many times. I believe it with all my heart. If you’re looking for low-stress, set-it-and-forget-it, expertly managed real estate assets—the opportunity to be bored—I think passive investments are a great option.
It supposedly takes about 10,000 hours of practice to become an expert. All of us can only be an expert in a few arenas. If you are already an expert in a specific real estate niche and want to go deeper there, you might find great joy and life and peace, even boredom, in staying on that track. More power to ya!
But if you’re not, it can be a recipe for a wild ride. A ride that is not as fund or profitable as it looks.
It’s great to be an entrepreneur. Knock yourself out. But when it comes to investing, I recommend you compare it to watching paint dry.
Let’s get boring
We’ve been discussing the financial profitability of boring investing. But there are emotional and spiritual costs of exciting investing as well. So, let’s look at the concept of true wealth in this regard.
True wealth = assets that produce income. I’ve often discussed my assertion that generating a cash flow stream to support your lifestyle and your ability to impact the world for good is the essence of wealth.
Extravagant cars and toys can be a sign of wealth, but not the essence of it. And they may also be creating true wealth (assets that produce income) for someone else: your banker.
I’ll also postulate that true wealth is also freedom.
- Freedom from trading hours for dollars.
- Freedom from worrying about the price of your options, your crypto account, or the next GameStop.
- Freedom from toilets, tenants, and trash.
- Freedom to use your time and money to make a difference in the world.
- Freedom from agonizing over every financial decision.
Sailing into boredom
You’ve already met my friend and fellow BP investor, Kevin McGuire. Kevin is, well, rather boring.
And he’s proud of it! Just like me.
I was talking to Kevin last night, and he told me about his sailing club. Kevin’s club allows members to choose how to pay their dues. They can either pay a subscription fee by the month or a per-usage fee when they sail.
Kevin is near Seattle, and he’s been around the boating world for a while. He knows that most boat enthusiasts are on the water less than they dream of. He reasoned that the pay-per-use model would save him money.
But Kevin isn’t only boring. He’s wealthy.
Not just financially. He’s got a wealthy mindset.
So Kevin chose the subscription model. But it’s probably not why you’d expect.
Kevin chose the subscription model because he wanted freedom. Freedom from weighing each decision to sail on a financial balance. Freedom from fretting about the incremental cost when his friend came to town and he wanted to show him Puget Sound from the deck of his rented sloop.
For Kevin, true wealth includes the freedom from making daily decisions. Decisions like buying or selling a volatile equity or Bitcoin position. Freedom from deciding whether to evict that tenant (his property manager is quite capable). Freedom from the stress of exciting investments.
The hidden cost of exciting investing
Exciting investing can usually be called by a more accurate name: speculating.
Investing is when your principal is generally safe and you’ve got a chance to make a return. Speculating is when your principal is not at all safe and you’ve got a chance to make a return.
Speculating is usually more exciting. Investing is usually more profitable. And less stressful. And more freedom-generating.
Most of the world’s wealthiest invest. And they invest in mostly boring assets. Assets that produce predictable cash flow. And freedom.
Because true wealth relieves financial risk, along with financial worries, stress, and other freedom inhibitors.
True wealth produces more time. More wealth. More freedom. A better life.
I told you how Kevin learned about the beauty of investing in boring ETFs and boring real estate. His training ground came from spending endless hours watching the price of his stock options seesaw up and down and up again.
Kevin told me he lost countless productive hours in this pursuit. As a result, his success on the job and in his life probably suffered. And thus, his wealth likely diminished in the process. He lost sleep over it, and his productivity suffered even more.
I’ve noticed that people who are chained to stock tickers and other “exciting” investments aren’t always fully present in a group of friends. Their minds seem elsewhere. They aren’t free.
Kevin didn’t make a dime more on his options for all that worry. But it’s likely his net worth suffered in the arenas of time, money, relationships, health, and productivity.
Years have passed. Kevin has adjusted his investments to support his lifestyle. ETFs have replaced individual stocks, and he rarely checks the balance. He’s not the primary manager of most of his real estate investments, and he’s completely passive in others. He trusts experts to deal with the details, and he collects the checks.
Kevin owns assets that produce income. Kevin has true wealth.
As a result of many smart moves and a new view on wealth and freedom, Kevin walked away from a lucrative tech salary, choosing not to continue climbing the ladder at Amazon. He had a nice job and a good life there.
But he wanted a great life. He wanted freedom. And passive investing in ETFs and real estate made that a reality.
So, Kevin sails. He enjoys friendships and sunsets. He decides how to spend his time. And he makes a difference in lives like mine. And hopefully now yours.
He believes the purpose of wealth is to support a great lifestyle. A life of peace. He told me, “The way one builds and maintains their wealth should support the same lifestyle along the journey, and not detract from that lifestyle in the process.”
I’ve learned a lot from Kevin, and I hope you have, too. The freedom he has—both financial and otherwise—is attractive. I believe this is what we all want.
Now who’s ready to be bored?