“Sometimes the road less traveled is less traveled for a reason.” ~Seinfeld
This post has been rolling around in my head for a long time now, and I wanted to throw it out there. It may seem contradictory to a lot of the other material on Bounteo, but I’d like to at least start the discussion.
There are tons of personal finance bloggers out there, and most of them would probably point to the pattern of thrift and investing in the stock market for the long-term (usually via index funds) as the most proven way to achieve wealth. Studies have certainly born this theory out, and I have advocated the same thing on this site and elsewhere.
However, a nagging doubt at the back of my head is this: just because something worked in the past, does that mean it will work in the future? Also, just because 80% of millionaires made their money using method A, does that mean that you should take that route? Maybe methods B & C are a better fit for you, for the age we live in, or maybe they’re just simply less obvious / harder so fewer people try them.
Should we take the tried-and-true route to wealth, even if it doesn’t inspire us?
Here are some examples of taking the road less traveled in terms of wealth:
Dropping out of college or skipping college to start a business
Probably not a ton of people who would advocate this, but it’s a common story among the super-rich. Bill Gates, Steve Jobs, Mark Zuckerberg, Michael Dell, the list goes on and on. Now, please understand, I’m a huge advocate of college, but lots of people have succeeded without it. Maybe there’s something else that works better for you.
Leveraging your investments by buying on margin, trading stock options, or day trading
Are you likely to succeed at this? Statistically, absolutely not. However, I personally know some people who have done very well in these areas. I have a hard time thinking of circumstances where I would encourage it, but why should you listen to me?
Skipping the stock market altogether and just focusing on real estate
Real estate is a proven path to wealth, so perhaps it doesn’t belong in this category, but for whatever reason, I see a lot of personal finance bloggers making the argument that real estate is too advanced for most people or offers inferior returns to those of index funds. Neither are necessarily true. Unlike index funds, real estate is an investment that you can directly improve through hard work and dedication. Returns that are orders of magnitude larger than the stock market are not uncommon for professional real estate investors. “But I’m not a professional”, you say? Well, do you want to be? All those professionals started somewhere, too.
Bootstrapping a business with your credit cards
Does this path carry a lot of risk? Absolutely. Are there other ways to accomplish the same thing? Yes, there usually are, but what if this is the only option you have? Should you not take it just because some blogger said it was a bad idea? Lots of businesses have been started this way, and while it’s not an ideal start, if it’s this or no start, it may be worth it.
Borrowing from your 401k to fund investments
Becoming a bank robber
Just kidding. Getting wealth through dishonest means is never worth it.
I say all that to say this: there are many paths to wealth, beyond just the old “save and invest in things that are boring” routine that is often bandied about, even here on Bounteo. That plan is a great one for the vast majority of people, and it’s certainly better than no plan at all for 100% of people, but what about those people who are driven to do more? Well, if you’re determined to go your own way and explore the road that’s even less traveled, here’s some advice for the journey:
- Don’t lie to yourself – Be honest about the risks you’re taking
- Manage the risk – Just because you’re taking extra risk doesn’t mean you can’t control or manage it
- Don’t be risky – There’s a difference between taking risk and being risky (aka reckless)
- Have a plan – Before you jump in, think about your path and how you’ll deal with different scenarios
- Seek advice – You’re probably not the first to travel down this road, so get advice from those who have
- Don’t abandon the basics – Do what you can to cover your downside and provide an insurance plan if things go south
- Stay involved – Nothing good ever just happens to people on the road less traveled; you have to make it happen.
Bonus #8: Know when to call it quits – There’s no shame in giving it your best and failing. What’s sad is people who stumble on in a zombie state for years, wasting valuable time that they could spend on their next attempt.