Is It The Right Time To Get Into Wall Street Investments?
Some of the newer investors are rightfully worried about investing their hard-earned money into the stock market. They are worried about a potentially inflated economy and don’t want to buy mutual funds at their all-time high, just to see their value plummet once the market corrects.
This post is a little about the dilemma of waiting to invest your money or putting it all in now. I won’t be getting into any scientific detail, for that you can read the work by many great authors who have dedicated their careers writing about these things. As always, I write my thoughts based on my own tireless research and experiences.
Do You Even Want To Be Invested On Wall Street?
This is the elephant in the room. Forget passive index funds, hedge funds and REITs. Are you someone who wants to see their investments fluctuate up and down? Are you okay with occasional 10-15% gains with random 20-50% losses?
It’s crap to say that you must be invested in the “market” in order to secure a retirement or to make your money grow. That’s the first layer of the onion and it’s the most accessible. It’s how so many companies are making money off the consumer, including banks, brokerage houses, financial advisers, insurance salespeople and even your pension custodians.
I don’t think we should jump straight to “alternatives to Wall Street”, doing so would completely dismiss the value of your money. Remember, the money you’re about to invest is the most accessible form of compensation for your hard work.
Income Isn’t Your Only Compensation From Your Job
The income you’ve earned isn’t the only form of compensation. You learned a trade, you developed a specialised skill and you built your own skills on top of those skills, you became a money-earning machine. You have made build contacts with colleagues, built a reputation for yourself and added lines to your resume.
The income you generated was taxed to shit and you had to spend boat-loads just to be able to create the kind of life that would allow you to practice medicine. Let’s say that after all is said and done, 40 cents of every dollar is money that you get to keep. This is conservative, for those of you who make $250k/year you’re likely earning a real 30 cents on the dollar. For the higher earning specialists it’s probably closer to 45-50 cents.
The skills, in turn, are at a 1:1 ratio. I would actually say that if you work even 20% harder than your colleagues then you could get back 150% on this intangible return.
Keeping Your Savings In Cash
If you kept your money in cash for the foreseeable future the chance of inflation eating into its value is quite insubstantial. Inflation doesn’t work like an hourglass, where you can see the sand grains getting sucked down by gravity in a steady fashion, it’s a gradual process with a compounding long-term effect.
You have incredible control over your own personal rate of inflation
Investing is a term used to describe making your assets grow over time. You could be investing by buying businesses, starting them, investing in local businesses, putting money in real estate, increasing your earning potential or even drastically decreasing your overhead.
If you keep your money in cash then you can do so safely in a CD or a money market account. The money then is easily accessible should a good opportunity arise.
The concept that your money is sitting idle in a savings account is completely incorrect. Your money is collecting potential energy, by having easy access you are exponentially increasing your potential to invest in something worthwhile.
The financial industry uses such terms as ‘idle cash’ and ‘uninvested assets’ only because they are working within the realm of traditional investments. If your financial adviser was some brilliant investor or entrepreneur do you think they would tell you to max out your 401k and do a backdoor IRA? Fuck no. They would tell you to search for business opportunities within your field of expertise, learn everything about it, take some of your own money and raise some money from your network and go all in.
Even money that you lost investing in such ventures isn’t wasted money, it’s part of the process. Now, I realize this advice is really geared towards someone who wants to make big dollar moves and not just earn 3-4% on their investment, but it needs to be said because it’s not common speak among advisers.
Investing More In Yourself
As a family doctor I’ve had other fellow FP’s tell me that they’ve thought about going back into residency to do ortho, ER or ENT. Generally, something that’s more lucrative than family medicine.
Sure, you can take a massive pay cut for the next 3-5 years and get a specialty degree, come out and work your ass off to gain the expertise of that particular specialist. Is that a good way to invest your time and money? I’m not sure, I can tell you that if it resonates with you then you should do everything possible to make it happen.
You may love the idea of investing money, you might even be really good at it but don’t want these shitty little 3% returns. In that case, you may want to start your own hedge fund because you’ve proven your investing skills.
You may love real estate speculation, you don’t want to just earn $300/month on each of 10 residential properties. Instead, you want to be the one building medium-sized condominium complexes and renting them out or selling them. You might need to go get your contractor license followed by your real estate license.
Invest In What Makes Sense To You
I invest in index funds because they make sense to me. I know they will go down, I know that more irrational investors will jump out of them when they tank and more greedy investors will jump on board when they start being the hottest thing on CNBC.
I believe that my long-term presence in the market will make up for those downturns. What I mean by that is that if I’m invested for 8 years then I’m earning dividends and reinvesting them back into my portfolio. Then when the market goes down I’m more likely to invest even more because I’m speculating that index funds in the long-run will appreciate.
If real estate makes more sense to you then you should put every ounce of energy and resource into building up that asset, whether it’s the skill-portion now and the portfolio later when you have more money.
If running your own business makes sense to you then you should look at your medical specialty and see if that’s something you could privatize. If not, you can always look at other business models out there, whether it’s chains or investing in startups.
Don’t let any of your assets sit idle, collecting dust. If you don’t have money then invest your time and if you don’t have time then hire the right people to do the work which you can pay for.
Don’t Forget About ANNUITIES And CD Interest
Though annuities have become a 4-letter word they definitely still have a solid role in retirement planning. Whether you choose a fixed annuity or a variable one you can definitely create the kind of income-stream needed to support your household.
CD and savings account rates are still abysmal but I don’t expect they will continue to be so. Once we start seeing 3%+ returns on CD’s then I’m sure many will move their money out of their brokerage accounts and into those. And a few years after that, the tides will turn once again and you’ll see the ads from the CD banks urging you to not take your money out because the market is risky.
Moving Up The Income Ladder
The final way that you can still achieve your investment goals while keeping your money out of Wall Street is to demand a higher wage for your expertise within your particular field.
If you are an anesthesiologist then you can do what it takes to become a medical director. From there you can move on to become the chief and possibly take on a bigger role in your medical group.
As doctors we rarely think of such options because we think it’s so hard to be considered for those positions. In fact, that’s exactly what makes those positions easier to get, the fact that everyone thinks it’s impossible to get them.
If you are generating millions a year in income then how worried would you be about whether you are invested in index funds versus bonds? With that kind of money you are the kind of big fish that investment bankers will talk to. Suddenly, you’ll have investment options packaged up for you nice and neatly and mailed to your office. It could be shares in 12 Jack In The Box stores opening in Japan or it could be shares in 12 oil rigs being built-in South America.
2 replies on “Keeping Your Cash On The Sidelines Because The Stock Market Is Bloated”
Very nice and unique article, thanks for such treat tips on investments.
Glad it was helpful. Definitely something I am trying to research more. There is a feeling of security when you have one main, baseline method of investing your money. But it certainly doesn’t have to be your only one. From that position of stability and safety, it’s good to look at some alternatives and invest there. That’s how I’m seeing it, we shall see how that will change over time.