Three reasons why you have to have patience when you are pursuing wealth.

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The other day on Facebook someone asked a general question: “If you had $10,000 how would you flip it?” I told him to throw it into Todd Acquisitions and he hesitated because he couldn’t put the money away for 3-5 years and he was looking to turn the money a lot faster than 3-5.  He was looking for a flip.  I followed the post and saw some no name person telling him to day trade.  After that I didn’t see any other posts. Another time on Facebook I saw a post from someone asking what they should invest in with $100 dollars. I told them that if they have $100 dollars they should invest in a savings account until they have $1,000 dollars and then we can talk. They didn’t like that answer.

The last example is our Under Armour Stock.  Under Armour stock is down 16% on our total portfolio, it is down about 7% today.  We are all looking because we expected a pop on earnings and we expected UA to begin the process of turning itself around.  Last quarter it popped 10% but this time around it dropped 7%.  We know the strength is there but the market doesn’t.  At least not yet.  Wouldn’t be the first time that the market was wrong.  

All of these examples indicate a lack of patience in the process.  People are putting money in the stock market and then watching it like day traders, looking for quick profits.  People are trying to invest with little to no money instead of disciplining themselves so they can have a descent sum to invest.  People want to flip instead of work a process but you cant, you have to have patience.  Patience is necessary because without it you will be forced to pursue unrealistic returns via riskier investments with significant downside, the fees on smaller amounts will eat up your gains and lastly because nothing worth having ever came quick.

1. Pushes you to pursue unrealistic returns

Grant Cardone doesn’t advise anyone to invest in anything until they have at least $100,000 banked.  This is because any win on a smaller amount wouldn’t amount to a real win.  This is why the person with $10,000 wants to flip $10,000 because in the grand scheme $10,000 isn’t big money.  10% (not a flip) on $10,000 is $1,000.  When you invest with small money you have to flip it, aka get a 100% return because anything less wouldn’t make an impact on your life.

While flips and investments that yield 100%+ returns exist, they are usually in investments that are reserved for accredited investors.  An accredited investor is someone with over $1 mil in net worth, not including personal residence and/or someone who makes $250,000 per year.  These 100%+ deals are out there, but you have to stack and strategize to get there.  They also are typically on a similar time horizon as Todd Acquisitions (3-5 years).  With the new crowdfunding rules you can get access to these opportunities but that is the exception at this point, not the rule.

A better strategy is to put that $10,000 to work with an adviser or someone like me and then get back to work at what you do best so you can systematically and aggressively add to the sum you have invested.  When I proposed TA I did so with the knowledge that we could find a deal that would allow the $10,000 to be put to work as equity in a fix to refi, pulling out the $10,000 while retaining the ownership.  But even if we didn’t do that, a better strategy is still to stack the $10,000 and then go back to work.  The flip of $10,000 likely would have pushed him into the day trading idea that the no name person recommended and he would have proceeded to lose it all in bad deals.

2. Fees will ruin your return

Another problem is that when you invest small, the fees and expenses will eat up your returns.  That is why I told the person with $100 to save, instead of throwing the money into stocks.  When you invest a small amount of money you typically pay more in commission than you would ever make in gains.  For example, if you invest with Scottrade and trades cost $7, you have to pay $7 in and $7 out, which is $14 bucks (14%). If that is the case, on a 100 dollar investment you have to make 14% just to break even.  Not a lot of people make 14% per year.  The average rate of return is 8-12% so if you are average, you would have taken a loss, even if you won. 

With the advent of robinhood this is less of a problem because now you can trade for free.  However, even if you can avoid commissions there are still taxes and maybe even hidden fees.  Additionally you still run into what was discussed in the prior section because you will be forced to take on more risk to get that exponential return to turn $100 into something, which opens you up to significant downside risk as well,  Add that to your commissions and you are in for a world of hurt.

3. Nothing worth having ever came quick

You have to be patient and work your process.  Everyone wants to be rich, but if after 3-5 years you have given yourself a six figure next egg that generates $10,000 per year or an extra grand per month, that is financial progress.  Financial freedom is the goal but financial progress is still an accomplishment. 

You didn’t go broke, average or even to the middle class quick, so you cant expect to get rich quick. You might not be able to get rich quick but you can definitely make progress quick. You can make progress now if you stop seeking a quick solution and start working a strategy.

The reason I designed the investment club how I designed it is with all of these things in mind.  We consistently add money to our investments strategically we don’t just throw $100 at it and wait.  We invest as a group so commissions are eliminated by scale and since we are aiming for 3-5 years we can buy stable core positions and afford to take risk which has some downside attached to it.  If you wan’t to be a part of our club please email info@capitaltodd.com, we would love to have you aboard.

Be great,

Todd Millionaire

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