71: Pitfalls Series: When You Invest in the Wrong Arena

In this new 3-part series, we’re talking all about pitfalls in investing. Whether you’re investing in actual investments, in a team for your business, or not investing in yourself, there are a number of “uh-oh’s” we all encounter at some point. But Dustin and Danielle are hoping to raise some awareness of these pitfalls so that Worth It listeners don’t have to encounter them.

In this first part of the series, Dustin and Danielle are talking about the pitfalls of investing in the wrong arena.

WHAT YOU’LL LEARN

02:16 Why you’re losing money if you’re just saving

02:47 The reason real estate is a big pitfall

03:54 Danielle’s horror story about a “property management” company

10:20 Why making money leads to fear

10:33 All about the “sharks” that come out when you start making money

11:25 The pitfalls of private equity

11:58 The hubris that sometimes comes with being successful in business

12:53 The similarities between Monopoly and real life

14:23 The real definition of speculation

16:29 Other ways you can contribute and give back

17:20 The downfall of collectibles (it’s not just your Ty beanie babies)

20:04 Why you have to be careful about who you trust

22:24 What you can do to avoid these pitfalls

23:32 The benefits of public diversified funds

23:48 Why hands-off, passive investments are best for busy entrepreneurs

24:47 Why you should still pursue these other asset classes if you enjoy them

 

REAL ESTATE AIN’T ALWAYS ROSY

Do you think real estate is a good option for all that extra cash on hand? You’re not alone. 85% of Millennials think investing in real estate is a smart option, and it may be… for some. Dustin and Danielle touch on the unexpected risks associated with real estate, including a horror story about a “property management company” that lost a couple multiple thousands of dollars and many months without a renter. While real estate can be a great option, especially if it’s your business or your passion, it’s not always the best choice for people who are new to investments and property management. Listen to the episode for a few alternatives and a few things to keep in mind if you’re actually considering real estate as an investment.

 

SHARK TANK - REAL LIFE EDITION

Who doesn’t love Shark Tank? A panel of venture capitalists basically offering thousands of dollars to back the next great thing. Unfortunately, though, people sometimes forget that Shark Tank is just good TV — real-life private equity isn’t that easy or safe. In fact, the investors on that show are very strategic about their investments and have clear contracts stating how they can get their money back.

In the episode, Dustin and Danielle talk about how many entrepreneurs feel the call to “give back” or “share their knowledge” when it comes to building a successful business. But remember: just because you’ve had luck with your business doesn’t mean that you’re an expert in all businesses. They also note that, once people come into money and start having a lot of cash, other peoples and companies come out of the woodwork asking if they want to invest. This can feel like a song that you’ve officially made it, but it doesn’t mean that it’s a smart investment. Most venture capitalists know they’re going to lose money on the majority of their investments (95% of them aren’t profitable) and they’ve been doing this for years. If you’re sinking all your cash into a company thinking you’re going to be profitable in no time, you may be sorely surprised when you lose it all.

 

PUBLIC DIVERSIFIED FUNDS ARE WHERE IT’S AT

So… if real estate and private equity aren’t your best bets, what is? In the episode, Dustin and Danielle talk about savings and investments — the stock market kind. Most people find the stock market to be risky, especially after 2008. But actually, there are a number of benefits to public diversified funds that you can’t find with other types of investments:

Low cost Low stress Low involvement (unlike real estate and private equity) Low research Low maintenance High liquidity

 

So when should you start investing in public diversified funds? Dustin and Danielle say to build up your 3 to 6-month emergency fund, then invest the rest. (If you’re not sure how much cash you need on hand, check out Episode 69 and use the Cash on Hand Calculator). It’s really easy to start investing — you can work with a financial planner or even “DIY it” online with tools like Vanguard, Charles Schwab, Swell, and more.

 

THE BIGGEST PITFALL: NOT DIVERSIFYING

The big takeaway from this episode? Diversify. If you want, you can do real estate, invest in businesses, start a side hustle, whatever you want. You can also invest in stocks (some of which are actually real estate and startups!). If these asset classes really light you up and you love managing properties or helping businesses grow, do that. But invest in public diversified funds and also save liquid cash. Never put all your eggs in one basket; that’s how you save for the future and make sure your wealth is secure.

 

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED Our Resource Vault The Toujours Planning Quiz — are we a good fit for your financial planning needs? Episode 66: Your Business Runs on Liquidity (And So Should You) Episode 69: How Much Cash Do You Need On Hand?

 

CONNECT WITH DANIELLE AND DUSTIN Ask Your Questions On Facebook On Twitter

In this new 3-part series, we’re talking all about pitfalls in investing. Whether you’re investing in actual investments, in a team for your business, or not investing in yourself, there are a number of “uh-oh’s” we all encounter at some point. But Dustin and Danielle are hoping to raise some awareness of these pitfalls so that Worth It listeners don’t have to encounter them.

In this first part of the series, Dustin and Danielle are talking about the pitfalls of investing in the wrong arena.

WHAT YOU’LL LEARN

02:16 Why you’re losing money if you’re just saving

02:47 The reason real estate is a big pitfall

03:54 Danielle’s horror story about a “property management” company

10:20 Why making money leads to fear

10:33 All about the “sharks” that come out when you start making money

11:25 The pitfalls of private equity

11:58 The hubris that sometimes comes with being successful in business

12:53 The similarities between Monopoly and real life

14:23 The real definition of speculation

16:29 Other ways you can contribute and give back

17:20 The downfall of collectibles (it’s not just your Ty beanie babies)

20:04 Why you have to be careful about who you trust

22:24 What you can do to avoid these pitfalls

23:32 The benefits of public diversified funds

23:48 Why hands-off, passive investments are best for busy entrepreneurs

24:47 Why you should still pursue these other asset classes if you enjoy them

 

REAL ESTATE AIN’T ALWAYS ROSY

Do you think real estate is a good option for all that extra cash on hand? You’re not alone. 85% of Millennials think investing in real estate is a smart option, and it may be… for some. Dustin and Danielle touch on the unexpected risks associated with real estate, including a horror story about a “property management company” that lost a couple multiple thousands of dollars and many months without a renter. While real estate can be a great option, especially if it’s your business or your passion, it’s not always the best choice for people who are new to investments and property management. Listen to the episode for a few alternatives and a few things to keep in mind if you’re actually considering real estate as an investment.

 

SHARK TANK - REAL LIFE EDITION

Who doesn’t love Shark Tank? A panel of venture capitalists basically offering thousands of dollars to back the next great thing. Unfortunately, though, people sometimes forget that Shark Tank is just good TV — real-life private equity isn’t that easy or safe. In fact, the investors on that show are very strategic about their investments and have clear contracts stating how they can get their money back.

In the episode, Dustin and Danielle talk about how many entrepreneurs feel the call to “give back” or “share their knowledge” when it comes to building a successful business. But remember: just because you’ve had luck with your business doesn’t mean that you’re an expert in all businesses. They also note that, once people come into money and start having a lot of cash, other peoples and companies come out of the woodwork asking if they want to invest. This can feel like a song that you’ve officially made it, but it doesn’t mean that it’s a smart investment. Most venture capitalists know they’re going to lose money on the majority of their investments (95% of them aren’t profitable) and they’ve been doing this for years. If you’re sinking all your cash into a company thinking you’re going to be profitable in no time, you may be sorely surprised when you lose it all.

 

PUBLIC DIVERSIFIED FUNDS ARE WHERE IT’S AT

So… if real estate and private equity aren’t your best bets, what is? In the episode, Dustin and Danielle talk about savings and investments — the stock market kind. Most people find the stock market to be risky, especially after 2008. But actually, there are a number of benefits to public diversified funds that you can’t find with other types of investments:

Low cost Low stress Low involvement (unlike real estate and private equity) Low research Low maintenance High liquidity

 

So when should you start investing in public diversified funds? Dustin and Danielle say to build up your 3 to 6-month emergency fund, then invest the rest. (If you’re not sure how much cash you need on hand, check out Episode 69 and use the Cash on Hand Calculator). It’s really easy to start investing — you can work with a financial planner or even “DIY it” online with tools like Vanguard, Charles Schwab, Swell, and more.

 

THE BIGGEST PITFALL: NOT DIVERSIFYING

The big takeaway from this episode? Diversify. If you want, you can do real estate, invest in businesses, start a side hustle, whatever you want. You can also invest in stocks (some of which are actually real estate and startups!). If these asset classes really light you up and you love managing properties or helping businesses grow, do that. But invest in public diversified funds and also save liquid cash. Never put all your eggs in one basket; that’s how you save for the future and make sure your wealth is secure.

 

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED Our Resource Vault The Toujours Planning Quiz — are we a good fit for your financial planning needs? Episode 66: Your Business Runs on Liquidity (And So Should You) Episode 69: How Much Cash Do You Need On Hand?

 

CONNECT WITH DANIELLE AND DUSTIN Ask Your Questions On Facebook On Twitter