I remember back when I landed my first service advisor position in the auto industry.
Working my way up from a parts driver (making, like, $9.00/hour) in 2005, I found myself staring down a big promotion as a service advisor in the spring of 2006 (now making almost $30,000/year).
It made me feel like I had finally “made it”.
Of course, the euphoria was short lived, which eventually led to the journey toward financial freedom. The rest, as they say, is history.
But I bring up this bit of personal history so that I can share a quick anecdote.
Faking Hard Work Is Harder Work Than Working Hard
In order to properly perform my job as a service advisor, I relied on a support staff that would assist with all kinds of ancillary tasks.
One of these ancillary tasks was making sure cars were washed and dried after service, which enhanced the value proposition we were offering at the dealership. Another ancillary task was picking up customers and/or dropping them off before and/or after service was completed.
Various errands like these were pretty basic, but they were vital to the smooth operation we were running.
And so we relied pretty heavily on porters to complete these errands.
Well, like anything else in this life, some porters were great… and some were, umm, not so great.
I remember one particular porter would play this really neat game where he often made himself appear to be unavailable or busy precisely when we would need him the most. It took me a little while to figure out what this guy was actually up to.
Basically, he would fake hard work so that he could avoid actual hard work.
And even when we could nail him down and assign him to an errand, it would turn into some kind of saga that took forever. The whole thing became a running joke throughout the dealership. It seemed almost impossible to be so unavailable and take so long to complete these basic errands, but that’s exactly what was happening. Even the other porters at the dealership would laugh in disbelief at this guy’s proficiency at extending or outright faking “busy work”.
If you ever imagined a person who can spend 30 minutes sweeping one spot on a floor, this is that guy.
Being the curious person I am, I became pretty interested in what exactly was happening here.
So I once assigned him to washing a car that would be picked up later in the day. Then I came around to the back of the dealership to watch his game from a vantage point.
He managed to stretch out a five-minute task into a thirty-minute escapade.
There was the exaggerated walk that was clearly designed to slow down time. The unnecessary moving of the car from one place to another. The spraying down of one spot on the car for way too long. The intermittent stoppage. The sitting in the car and listening to the radio. The very casual interpretation of vacuuming.
We might just chalk this up to being lazy.
But I remember thinking it would be absolutely exhausting to play this game, day in and day out.
To pretend I was busy, avoid people, remember to forget certain things, and purposely go out of my way to stretch every possible task out seemed like an incredible amount of work. It was like a role you had to be ready to play.
I came away astonished. But I also had to admit it was pretty impressive.
Looking at everything he had to do in order to limit the number of tasks he had to do in any single day was actually really hard work. It might not have been physically demanding (which, I suppose, was the point), but this was like some kind of war of attrition that required his ability to mentally always stay one step ahead of everyone else. Every stretched-out action required a thought-out plan.
He was constantly jumping through hoops. Hoops of his own design.
Of course, this isn’t a career here. Guys like this don’t last long at these jobs, nor do they advance. And then there’s the hard work that goes into looking for another job, moving through the interviews, and starting the game all over again. Also, you have the potential financial concerns and hoops to jump through while you’re out of a paycheck. It’s so much hard work and hoop jumping that could be avoided by simply manning up and doing the work.
What does this have to do with investing?
Well, quite a bit.
Intelligent Investing Is Actually Easier Than Unintelligent Investing
Investing is a passion of mine. Like any passion I pursue in my life, I take it very seriously and try to do it to the best of my ability.
Becoming an intelligent and informed investor isn’t something that happens overnight.
There’s a long, steady process of accumulating knowledge. This occurs through the consumption of information. Many of the books I’ve read in order to accumulate my knowledge have been openly shared with you readers.
The good news is that knowledge builds up, just like compound interest. One piece of new information complements another piece of old information. There’s a synergy in knowledge that’s wonderful when it’s operating at full speed and capacity, and you can quickly see how the whole becomes greater than the sum of its parts.
And like compound interest, knowledge becomes a powerful tool to wield once you’ve been at it for quite a while. It’s later in the curve that you see the benefits play out in a very direct and positive way.
What starts out as something where you’re doing the work (reading, listening, watching, etc.), later becomes something where you sit back and let it do the work for you.
For example, I can spend less than five minutes looking at a prospective business for investment and decide right then and there if it’s a compelling idea.
This is a process that’s been honed and refined over the course of years.
Believe me, when I first started investing, it used to take me quite a while to even just wrap my brain around numbers and get a feel for what I was looking at.
Net margin? Return on equity? What’s this number over here? Why does that ratio matter?
So on and so forth.
What now takes less than five minutes might have taken an hour (or more) back in 2010.
By performing the hard work that’s involved in educating myself, consuming information, building up my knowledge, and gaining experience, I’ve become the vision I once had in mind when I foresaw an intelligent investor. And I’m able to let that knowledge go to bat for me, which allows me to allocate my resources in other areas of my life.
Through this process, I’ve built up the six-figure FIRE Fund that generates the reliable and growing five-figure passive dividend income I need to pay my bills and freely go about my life without needing a job.
You’ll see that my real-life and real-money portfolio is chock-full of wonderful businesses that an intelligent investor would go after.
These are high-quality stocks.
And since an intelligent investor invests for the long haul, one would naturally partner up with businesses that are long-term compounding machines.
Part of being a long-term compounding machine is the payment of dividends and growth of those dividends.
Every publicly-traded company is ultimately owned by its shareholders. Those shareholders deserve their rightful share of whatever profit these companies are producing. That return of profit occurs through cash dividend payments. And as profit grows, so should those cash dividend payments.
An intelligent investor is aware that a longstanding track record of growing dividends serves as a great initial litmus test of business quality, for a terrible business that is losing a ton of money can’t somehow simultaneously pay out rising cash dividend payments year in and year out.
The intelligent investor understands that successful long-term investing shouldn’t be complicated. In fact, the more complicated a company is, the worse it probably is as an investment.
That’s why my portfolio is full of business models that are simple to understand and highly profitable.
Of course, an intelligent investor always aims to acquire stock in a business when the shares are available at a reasonable valuation. This translates into buying high-quality dividend growth stocks when they’re undervalued.
Finally, an intelligent investor achieves a reasonable amount of diversification to protect themselves against unforeseen events. A smart investor recognizes their limitations. By remaining humble, they realize that they can’t predict the future, and so they go about protecting themselves against any one single business issue/failure.
And because they can sleep well at night knowing everything is done fairly correctly, they can ignore noise and the media. They don’t pay attention to people’s opinions. They sit on that equity, collect the growing dividend income, and become very wealthy.
By taking investing seriously and doing my best to invest intelligently, I went from below broke at 27 years old to financially free at 33. Zero to hero in six years.
All of this is very, very straightforward. There’s some hard work on the front end, but it becomes very easy to follow through on once you get everything lined up at the start.
I currently spend very little time managing my portfolio, thinking about money, or worrying about finances in general.
Now, let’s compare all of this to what an unintelligent investor might do.
They probably have a concentrated portfolio that’s chock-full of low-quality companies they don’t understand.
They’re buying up penny stocks in some frontier industry, or they’re loading up on bitcoin, or they’re trading in and out of stocks like baseball cards.
They pay an inordinate amount of attention to media and other noise.
Looking at financial statements seems like hard work, so they’d rather stretch out the time they spend on fancy charts they don’t really understand.
Dividends don’t matter. And even if they did, the companies they’re investing in couldn’t afford them.
An unintelligent investor doesn’t have a good grasp on time, and so “long-term investing” is akin to keeping a stock for a whole (gasp!) six months. That’s longer than some sitcoms last on TV, so it seems like a long time.
To the unintelligent investor, complicated is good. If they can’t easily understand it, that must mean that’s where all the “smart money” is going. Easy business models can’t possibly make money for anyone, or else everyone would be in those businesses.
Valuation isn’t terribly important, either, because it’s all about massive growth. If this stock could double or triple in a month, there’s no use looking at valuation.
And forget about the fact that the company doesn’t make money, nor do they have a good path toward profitability – they have a complicated story that simply deserves a chance.
An unintelligent investor finds it difficult to build and keep wealth. They’re always one moon shot away from making it big, but they’ve just had a run of bad luck.
Because of this, there’s constant stress and worrying about money. They think about money, investing, and getting rich quick all of the time.
It’s Exhausting To Do Things The Wrong Way
If you think any of this is crazy, it’s not. I’ve talked to many people like this – both in real life (plenty of “investors” here in Chiang Mai) and via emails over the years.
It was exhausting just for me to type that out. And whenever I hear someone start to talk about unintelligent investing, I become uncomfortably tired. It’s all mental gymnastics that wears me out thinking about it.
Buying a high-quality dividend growth stock at a compelling valuation and then sitting on it is just about the easiest thing one can do, after they accumulate the knowledge necessary to repetitively invest intelligently.
Intelligent investing, as I see it, is actually much, much easier than unintelligent investing.
And that’s not even counting all of the ancillary lifestyle benefits that come with intelligent investing.
The constant stressing out about money is a big reason I chased after FIRE in the first place.
I didn’t want to worry about money, the 9-5, or bills ever again. To have that worry haunt me through the process I was using to become FIRE would be irony at its finest.
Even with all of the incredible information out there that’s designed to help investors become more informed and intelligent, there are still so many uninformed “investors” out there attempting to chase the quick buck.
It’s baffling not only because of its known ineffectiveness, but also because it’s so much more difficult than doing things the right way and putting in the work upfront.
I don’t know what ever happened to that porter. But I know what happened to me: I became Mr. Free At 33 by doing things the right way, working hard, and investing intelligently.
Like that porter I had the (dis)pleasure of meeting and working with way back when, I’ve met so many would-be investors who are bending over backwards to lose money.
So let’s all bend forward, make some money, and do things the right (and easy!) way.
What do you think? Is it easier to invest intelligently?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
P.S. If you’re looking to become a more informed and intelligent investor, check out some fantastic resources that I personally used to inform and educate myself on my way to become an intelligent investor and achieving financial freedom at only 33 years old!