Graham Stephan’s Post

The most common argument against picking stocks is that you can make a lot of mistakes if you don't know what you're doing. But here's another idea: You can do everything right and still lose. You can read your Ben Graham, do your homework, read security analysis, go through the 10-k reports and do everything you're supposed to. But one unlucky policy change or war or earthquake or just plain bad luck can change how your stock picks perform. The tricky thing about the market is that it's a Keynesian beauty contest – You don't get rich by just predicting the winners, you have to predict what other people will pick as winners. And that's incredibly hard. Even in the case of Warren Buffett, who is no doubt one of the smartest and most hard-working investors of all time, there's a huge amount of luck that made him who he is. If Buffett was born today and repeated his strategy from scratch, he might be successful but nowhere near the force of nature that he was when most people hadn't caught on to the idea of value investing and venture capital wasn't a thing. Here's a thought experiment for you to think about, from professor Aswath: Imagine you're 85 years old and somebody shows up with a record of all the investing decisions you made, your entire track record, and compared that with just buying and holding S&P 500 index funds. Would you regret all that time spent studying stocks? If the answer is yes, you have no business picking stocks.

If you're itching to time the market, here's a cautionary tale: If you had invested $10,000 in the S&P 500 and left it untouched, it would have grown to $64,000 in 20 years. But missing the best 10 days – out of 7,300 days – would drop your return to $29,000. - If you missed the best 20 days, you'd lose out on $47,000 worth of profit. - If you miss the best 30 days, you just break even. - If you miss the best 40 days, you flat out lose money. The kicker? The best days often occur during bear markets, when investors are at their most fearful. By cashing out and buying back in, even 0.13% of the time, you can damage your long-term wealth. Investing and sitting tight is the simplest strategy to think of but the hardest to pull off. (Image source: Visual Capitalist)

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The American dream is "a single family home with 2.5 kids and a dog." What if it was just a marketing scam?

Investing won't make you rich. Warren Buffet had "retired" even before he started Berkshire Hathaway. Hear me out: Sam Parr said this on David Perell's podcast: "You should look at the habits of successful people before they got big. A 13 year old basketball player should look at 𝘄𝗵𝗮𝘁 𝗟𝗲𝗯𝗿𝗼𝗻 𝗝𝗮𝗺𝗲𝘀 𝘄𝗮𝘀 𝗱𝗼𝗶𝗻𝗴 𝗮𝘁 𝟭𝟯, not what he’s doing today." I agree. A lot of beginners try to learn from Warren Buffett. There's definitely value in understanding his principles for any investor. But you need to understand 𝙝𝙤𝙬 𝙝𝙚 𝙜𝙤𝙩 𝙝𝙞𝙨 𝙨𝙩𝙖𝙧𝙩. Buffett started his partnership in 1956, after quitting his job as a securities analyst. He retired at 25, as a father. In some ways, Buffett was the pioneer of the FIRE movement. In his words: "When I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I'll go back to Omaha, take some college classes, and read a lot – I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, 'Compound interest guarantees I'm going to get rich.'" But how did he build his nest egg? Simple. He worked for it. • He sold newspapers as a student. • He started multiple businesses, including renting out pinball machines. • He was a securities salesman for 4 years. • He worked as a securities analyst at Graham Newman. All of his initial capital before he started managing money was either business income or savings from his salary. Buffett is famous for having a 20-30% annual return for decades. But from 1950 to 1955, his capital went from $9,800 to $127,000 – an annual increase 𝗼𝗳 𝟲𝟳%. Important lesson: For most young people, the fastest way to increase your net worth is 𝗯𝘆 𝗶𝗻𝘃𝗲𝘀𝘁𝗶𝗻𝗴 𝗶𝗻 𝘆𝗼𝘂𝗿𝘀𝗲𝗹𝗳. The rate at which your salary or business income grows can be rapid before it hits an upper limit. It's only after you hit that limit that investment returns will compound at a faster rate – This doesn't mean you shouldn't invest! The earlier you start dollar-cost averaging into an index fund, the more likely that you can retire faster. One day, your investment returns may bring in as much money as your income. Then you can worry about increasing your returns by 1 to 2%. Till then you're much better off upgrading your skills and growing your income. If you enjoyed reading this, please like and share so that more people see this:

Alex Hormozi has $60 million in cash. Here's how he spends it:

Many businesses give away stuff to attract customers. Alex Hormozi did the opposite and sold 4,000 gym memberships: Alex noticed that many gyms were giving away stuff to pull in customers. This does bring in people, but for the wrong reasons. Instead, Alex sold the result instead of the membership. This was his deal: A membership costs $500. But if you lost 20 pounds in 6 months, you would get all of your money back. This brought in committed people who wanted results. People were also motivated to win. To make sure that people were actually trying, they made a three point plan: - A fitness routine - A nutrition schedule - Accountability Accountability came from three sources – Peers who would walk the road with you, alumni who had already achieved the result you wanted, and expert coaches who had done this for hundreds of people previously. 78% of people hit their goals, which is incredible in this business. How did they make money with this "refund" program? Alex and his team were able to upsell products that recovered their costs otherwise. But even the people who won the challenge didn't really want their money back. They were so happy about achieving the results they wanted that they rolled over the $500 as credit for their next session and continued working out at the gym. Takeaway: People don't want "free" stuff. They want results. Giving someone a positive incentive to achieve results makes you money and also gets you a loyal customer.

Scammers are now demanding ransom by faking the voices of loved ones. The voices sound so real that 77% of victims paid up. For example, the New Yorker reported the story of Robin who got a call at 2 am claiming that her mother-in-law Mona was held hostage. The lady could hear a voice on the other end and it sounded exactly like Mona. The criminal extorted $750 threatening to kill her. After cutting the call, the family called her up and found that she had been safely asleep. They had been scammed. This wasn't an isolated incident. Parents and grandparents have been scammed with voices of children. The criminals usually create a sense of urgency to keep the people on the phone. How are these calls happening? McAfee reported that there are AI tools that can fake voices with just a 3 second sample. More than half of all adults share their voice on social media every week. You never know who's watching. Be careful of what you share online. Here's some advice from the FTC on what to do if you get such a call: 1. Stall on the call. Don't talk much as they could record your voice and clone it. 2. Try to verify the location of the person they're threatening. 3. Have a codeword for such situations that would identify if the other person is really in trouble. 4. Avoid picking up calls from unknown numbers and use call blockers. While only a small percentage of people fall for such scams, people could lose anywhere from $1,000 to $15,000 in the worst case. Do you know of anybody who's been caught in a situation like this? How would you deal with such a situation?