“Diversification is protection against ignorance. It makes little sense if you know what you are doing.”
— Warren Buffett
I am not a great investor. In fact, I have spent most of my investing days losing money.
That’s why I don’t tell people how to invest.
Instead, I ask: “how much do you know about this thing you’re asking me about?”
But… would you believe… people make entire careers out of telling people how to invest who (themselves) aren’t successful investors?
Most of these people are financial planners who make more moolah selling advice than taking it.
Brokers who pitch the latest “hot stock tip.”
Financial newsletter writers who sell investment advice (I mean, if the investments are that good, why give away the farm? I know I wouldn’t).
Financial bloggers and self-proclaimed ex-spurts who make a blanket recommendation to invest in index funds (by the way, Buffett’s statement above was specifically directed at what he calls “ignorant investors”… and recommended people who don’t know what they’re doing invest in index funds… which is why I find it amusing when “know nothing” investors start doling out investment advice).
If you want to be a successful investor, you have two choices: start your own business or learn about someone else’s business enough that you feel confident investing in it.
…which brings us to an interesting intersection.
I’m often asked “if you don’t do investments, what do you do?”
To which I reply: “insurance.”
To which people usually stare blankly at me.
Because it’s not an investment.
It’s a money-management tool.
And money management is a lifelong pursuit. It’s something you can teach but not something you can do (or learn) in a vacuum.
It enhances (almost) any business or investment strategy… but it’s not an investment.
It helps you finance (almost) anything yor little heart desires… but it’s not a bank (despite what some marketers tell you).
It will help you retire comfortably (if you so choose)… but it’s not a retirement plan.
It will pay for long-term care expenses (if you end up in a nursing home)… but it’s not long-term care insurance.
It (mostly) lurks in the shadows.
Because it looks incredibly “weak” on the surface.
And, part of the reason whole life insurance is SO misunderstood (and is practically “invisible” on peoples’ radar) is because of dictionary-definition ignorance and part of it is a focused anti-education effort by government (through several obscure laws) and cronyist corporations (who exploit those laws which were tailor-made for them).
The most selfish (and successful) business folk in history all owned at least some of it… which is a major reason why they were able to finance YUGE empires.
But you don’t need to have Ray Kroc or J.C. Penney-like ambitions.
You just need to understand the underlying money-management principles and have a (somewhat) creative mind.
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