The benefits of investing stretch far beyond the purpose of making money. When saving and investing, you will better understand the relationship between risk and reward, and that understanding will carry through to other avenues in your life, with every decision-making process. You will see opportunities in the face of change, even during negative circumstances and fearful world events, and look towards life’s ups and downs with a more optimistic eye, leaning more towards hope rather than fear. Let me explain.
Many of us have a bipolar relationship with money. We’re ecstatic when we’re earning and spending it and fearful of losing it and the things that it buys. We are never satisfied with the status quo, feeling more will make us happier. Our “wants” progressively enlarge well beyond our needs, dooming their once luxurious appeal into perceived “necessities.” As Thoreau said, “…I foresee that if my wants should be much increased, the labor required to supply them would become a drudgery.” And so this edict holds true for a great many people; they work hard to support a more abundant lifestyle, which insidiously degenerates into an awful mix of joyless work for joyless means. They become attached to materialism, seeking more as a means to happiness, requiring more work or worse, riskier or immoral means to achieve this. They have not learned from the past, from what history has taught, that time and time again happiness is not measured in dollars.
Many people thus do not save much of their hard-earned money, believing money is an easily renewable resource. Even worse, they go into debt to buy expensive stuff believing their future earning potential will pay for it. They are trapped running a never-ending hamster-wheel cycle of work-spend-work. Then comes the day they are unable work due to circumstances beyond their control, condemned to a terrible condition with little to no assets for years or hard work.
You can change this. Save something from each paycheck and live well within your means. This takes little effort. Separate your needs and wants. You will find many or your needs are actually wants you can easily go without.
Think of every dollar you save as a little employee who works for you, earning more money. This employee works for YOU, 24/7, without a break, without taking vacation or sick leave. This employee is making money for you while you are working, sleeping, sipping Margaritas on the beach or sitting on the can. This is powerful. Let the power of compounding interest work in your favor and watch your money grow exponentially.
There are no guarantees in life. You are not guaranteed to make money on your investments. You can play it safe by keeping it in a savings account or money market (which currently is paying a fraction of a percent per year). But inflation is greater than those vehicles, which devalues your money with time; it will have less purchasing power in the future. For a larger return, diversely invest in stocks and bonds and real estate; better yet, the mutual funds and ETFs (Exchange Traded Funds) that invest in them. Beware: inevitably there will be market declines. Over the short term you can lose money. But a long-term outlook (over multiple years) works favorably for those with patience. For instance, stocks tend to outperform savings and bonds and real estate over the long run.
There comes to play a risk-reward relationship with investing: the greater the potential returns, the greater the potential risks. This is true not only with investing, but for any worthwhile endeavor in life. You strive beyond mediocre accomplishments, work towards an audacious goal, and you commit to the due-diligence and hard work knowing there are guarantees of success. However, the chances for success increase the more you put into it.
Everything will not result favorably for you. You will encounter bad situations, unforeseeable hazards, unexpected setbacks. This is unavoidable. Everyone suffers, wreaking havoc on many a person’s soul. There’s a weird dichotomy of hope and fear; they come hand in hand and oscillate between good and bad tidings. But no one can predict the future, not even you, no matter how talented or gifted you may think you are. Expect bad stuff to occur in the future. Though it will not replace that ill-feeling that comes with any negative circumstance, it can soften the blow and prepare you into favorable action. You will learn to see the silver lining in every dark cloud, see hope more than fear, and turn your mind to seek opportunity in the doom and gloom, rather than fold and crumble.
Once you’ve gained more experience with investing, you will no doubt suffer losses. But you will learn from those losses and turn failure into something positive. As your assets accumulate, you are better able to tolerate the losses. You will realize that money is just an abstract means that helps you function as a citizen in this world-society but is not the ultimate measure of your life. You do not become a slave to it. You discover there are more important and more meaningful aspects in your life which often money cannot buy. These are the greater intangible rewards. Your risk-taking then goes beyond the realm of investing.
There is nothing wrong with wealth. There is a purpose for money. But don’t become greedy, don’t cause suffering in others because of your wealth accumulation. Just as overspending for pleasure leads to deleterious effects, so does miserly hoarding. You were put on earth for a purpose, a purpose that is much greater than yourself. Our function as human beings is towards a greater good, to serve humankind. Money is just another means to achieve that end.
Life—like investing--is a roller coaster, with a crescendo-decrescendo pattern of beautiful exhilaration tempered with periods of ugly sadness. You can’t have one without the other. We all go through this manic-depressive cycle; it’s all a part of being human. The most terrible way to live is by trying to avoid these ups and downs. This is the road to mediocrity! Avoid this like the plague! Follow this path and you cover your eyes out of fear. You’ll find you cannot entirely avoid negative circumstances and will instead perseverate on the negatives, which only begets more fear. You will miss opportunities staring straight in your face. You will have robed yourself of the ability to witness the glorious beauty in the simplest of things. This yin and yang of existence leads us to ultimate happiness, if we only learn to be happy in our present condition and satisfied with what we already have.
Paraphrasing a passage in the Bible: be fruitful and multiple. Making money and accumulating wealth is only one part of the fun journey of life. On your road to investing and wealth-building, heed this formulaic truth:
Money ≠ Happiness
Keep working, keep saving, but keep it all in perspective.
©Randall S. Fong, M.D.
For more topics on medicine, health and the weirdness of life in general, check out the rest of the blog site at randallfong.blogspot.com