3 Things

Random Words from our sponsor, Public.com

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Jason’s Random Words

I realize these words are a little bit late this week. I apologize for that. Jeff wrote last week, and it doesn’t take much for me to break a good habit.

One of the things I have been spending more time thinking about lately is wealth. On the podcast, I’ve talked so much about my move to start shifting some wealth into bonds and other fixed income investments, it’s starting to become a running joke.

But in some very real ways, I am definitely beginning to think — and act — more in ways to preserve wealth, not just grow it.

But as my brain likes to do, I’ve also been applying the Charlie Munger inversion principle to that situation. In this case, it’s inverting “what do I do to preserve some of my wealth,” to “what did I do to create this wealth?”

Answering that question honestly has required a lot of introspection. The answer in a nutshell: Luck, plus high earnings.

The “luck” part of that is two-fold. I’ve talked about this a lot, but I don’t think I an emphasis just how good the past 15 years has been for stock investors. Since October of 2009, the S&P 500 has generated 659% in total returns, an average of 14.4% per year.

Here’s the thing: That wasn’t even the market’s bottom. From March 9, 2007, the S&P has averaged a wealth-supercharging 17% in CAGR. That’s 70% better than the long-term average!

The first part of my luck is the period of time in which I aggressively entered the stock market. The second part is the high earnings. Not just that I have had two separate careers where I earned above-average income, and that I married someone who also has high earnings. But also that we have generally remained frugal, avoided much lifestyle creep, thus invested a significant portion of our discretionary income.

There’s a lot of luck in that, some that I created, and you can create too.

Jeff and I have recently started recording more short videos discussing these topics. We are putting them on YouTube, but will also make some shorter versions for Instagram and TikTok, and our other socials, too.

Here’s the short version of our video that hits the 3 things I think are most important to creating wealth. For those who don’t want to watch the video, here are the three things:

• Earn more money.

• Invest more of that money.

• Accept that you’re not Warren Buffett (yet).

The luck I got above, you can only create part of: figuring out how to earn more disposable income. You can’t control what the market will bear during your investing journey. You probably won’t — at least to start — be able to get better returns than the market bears. Maybe eventually you’ll get there. Once you learn how to get out of your own way first, and then how to do better.

But always, always, start by controlling what you can control. You can do it.

Jason