Received an interesting question this week…one that I almost filed under the category, “Sorry, but that is personal.”
But after 5 minutes of thinking about it, I realized it gave me a great opportunity to talk about an epiphany I had earlier this year.
So we’ll take a look at “what I do with my money”.
Question: Thanks for the great info in your newsletters….awesome stuff man!
I assume you are making pretty good profits online…what do you do with your profits? I know you have personal expenses, business expenses, put some money back into the business, give some away, etc.
But are you buying real estate, putting some into mutual funds, etc etc?? I read about people making $1,000,000 per yr online and wonder what they do with their “extra profits”? – Pete
Answer from Craig:
I’m conservative with my money.
I don’t own a car, a fancy house, … I was going to continue a list of all the fancy things I don’t own, but then I realized I don’t know what fancy things people DO own.
Aside from buying fancy dog food, I don’t spend a lot of money.
My investments are conservative, with ONE EXCEPTION.
I invest a LOT of money (relatively) in what some folks might say are extremely risky ventures.
But they are not risky to me.
Let me explain my philosophy and how it became crystal clear what I should do with my money.
It all started at the Sovereign Man Confidential event in Panama City this past winter, where I gave two talks on building website businesses and making money online.
One of the other speakers, and now a business partner of mine, Tim Stamrose, spoke about his investing methods and mentioned a book that had been a significant influence on him.
After his talk, I asked him for the name of it, and he was nice enough to give me a copy of the book right there, and it was one that has forever changed my attitude towards investing.
You see, for years I had read financial newsletter after financial newsletter, hearing about the riches available, and I’d gone so far as to order Ben Grahams “Intelligent Investor”, among a dozen other books (all that currently sit on my bookshelf unopened).
(This behavior sound familiar? Thousands of people do this with Internet Marketing products, fitness books, renovation books, etc.
My weakness is investing books.)
But as I read the book Tim gave me, I became extremely excited, and I had an epiphany, as I mentioned earlier.
In fact, I remember the exact moment on the plane ride back to Houston from Panama when it hit me.
It became crystal clear to me that I should never do my own stock picking. That would be a fool’s errand.
You see, the book was called, “The Winning Investment Habits of Warren Buffet and George Soros”, by Mark Tier (a friend of Tim’s).
This book struck such a nerve with me, that I wrote down their 23 investment priorities and 12 criteria of a good investment, and I review one of these each day when I do my “Daily Dozen Documents” readings.
But what really mattered most was the simple “Circle of Competence”
that Buffet and Soros use to guide what they invest in.
All you have to do is ask yourself 3 questions.
1. What are you interested in?
2. What do you know now?
3. What would you like to know about and are willing to learn?
First, I answered those questions about stocks.
Am I interested in them? – Kind of.
Do I know anything about them now? – Not a bit.
Am I willing to learn about them? – Well, in theory, yes. But as my bookshelf will tell you, in practice, no.
Listen, if I were to do my own investing, I’d be the guy that bought at the top and sold at the bottom.
I’d be fleeced.
But, when I answer those questions another way, I quickly identified where I should invest my money.
1. What are you interested in? – Information publishing.
2. What do you know now? – Quite a bit.
3. What would you like to know about and are willing to learn? – I live this stuff.
My passion for information publishing (online and offline) lined up with Buffet’s obsession with stocks.
In fact, one of Buffet’s 23 investment priorities is, “Live and breathe investing 24h/d”.
A few other ones on the list I liked are:
– Love what you do, not what you own
– It’s not about the money
– Create unique investment philosophy
– Focus on after-tax ROI
– Invest in what you UNDERSTAND (emphasis mine)
– Refuse investments outside criteria
– Passionately avoid risk
The last one makes you think that Buffet and Soros would thus recommend mutual funds.
But to them, investing the way they do is NOT a risk, because they are experts in it. The live and breathe investing.
The best analogy in my life is information publishing.
And so that is what I’ve decided to invest in…information publishing businesses.
In the past year I’ve put a lot of money into companies that I know are going to be winners. Companies all over the world too, from Singapore to America to the UK and Canada.
Because that is what I know.
So I hope that gives you something to think about.
Obviously, I highly recommend the book.
The 3 questions about creating your circle of competence are invaluable to any business owner, as are the 5 dimensions of a good investment.
Now this reminds me, I need to go update my Top 10 Business books list since I’ve read this one.
Add your favorite books to the discussion here:
And if we’ve learned nothing else today, then the lesson is:
Be careful what you ask me.
Have a great weekend,
“You can avoid reality. But you cannot avoid the consequences of avoiding reality.” – Ayn Rand