In the investing sector, there are three different groups of investors with different motives. Everyone has an agenda - some are more reckless than others.
Group #1 are the thrill-seekers. To them, investing is a game, and that game is to outdo someone or something else. Some have a goal to beat the S&P 500. Others want to outsmart Wall Street by beating others to the punch.
It's a timing game for them - picking up stocks before they rise and dumping them before they slide - profiting from anticipation. Group #1 and the market timers are about gambling and speculating. That's no long-term strategy to build on
In Group #2, investing is an extension of high school. They want to hang out with the cool kids. They're the first ones to jump on the latest trends and styles. They'll try anything. They just want to fit in. To put another way, they don't want to be left out and will do whatever the crowd is doing not to be left out of the conversation - no matter the outcome. More often than not, just like in high school, going with the crowd often ends in disaster because the crowd doesn't invest based on logic; they invest based purely on emotions. In high school, going with the crowd often means doing things you wouldn't typically do on your own. Neither is going with the herd. Going with the herd has historically resulted in disaster, so that strategy is no good.
In the first two groups, investors invest based on emotions - whether that's doing what thrills them by trying to outsmart the markets or chasing the next big thing like the cool kids are.
Then there's Group #3. This group doesn't have an agenda. They want to take emotion out of their investment decisions, so they play it safe or leave the decisions to financial advisors. In high school, these kids mostly stayed out of trouble. They went to school, got good grades, and probably had after-school jobs because it was safe, and it's what their parents' parents did. This group may end up making good incomes and salaries, but they don't do anything out of the norm. They just want to make it to retirement safely. Investing is a means to an end goal, that goal was NOT just to safely reach retirement or even that common lofty dream that others have of one day traveling.
Group #3 is this group of highly-compensated friends who are married to their jobs and could never seem to get time off to do the things they wanted to do. They didn't have the time to put thought into investing, so they left it to financial advisors - most of whom couldn't even beat the S&P 500 - or they stuffed their money in 401(k)s. The lives of these groups, despite all their education, high incomes, and big houses, they lacked the one thing that trumped everything else.
Andrew Lanoie - Forbes Councils Member
They are missing the freedom to do what they wanted and how, when, and were on their terms and not on the terms of the corporations, hospitals, or law firms they worked for:
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