When I was in my early twenties more than a decade ago, I was already doing pretty well financially. I was making over $100K/year, I had bought my own apartment (a co-op that I’d financed with a private mortgage), and I was living well within my means. It was then that I decided to take a stab at dabbling in the stock market. I was hoping to make some side money, and so I invested around $50K in an online brokerage account and began doing some short-term trading. The margin I was initially granted on my $50K investment was increased to $60K within a few months. On the day the market crashed in 2008, I was heavily leveraged and was left with less than one-third my original investment, but I did not slink off to lick my wounds. No, I plowed some of that money back into the market as it was bottoming out, and although it took a few years, I was able to recoup my original investment.
You can make money in both business and the stock market, but when push comes to shove, where do you put your focus?
When my biggest business failed in 2014, I still had three other businesses to fall back on. Unfortunately, I was drowning in debt from the failed venture because I had given personal guarantees to my creditors and they all had their hands out, demanding that I repay the money I owed them. A new business that I had acquired increased my debt. Still, by 2017, I had cleared all of that debt from my books through settlements and payments. Two years later, I was raking in the big bucks again; 2019 was my most profitable year at my largest business, besting my previous record high. I was no longer fighting forces that I had no control over. Because they were my businesses and I understood what made them tick, I kept a tight rein on their operations. I certainly had people who could help me realize my vision. Isn’t that what you want from your team? But now that I was so actively focused on my businesses, I pulled back a bit from the market. I was no longer actively trading. Instead, I came to think of my businesses as the market, and each one of my decisions affected their performance. (I could never make the same claim when playing the stock market. The forces influencing the market are simply beyond the control of any single investor.) I couldn’t claim to be right 100 percent of the time when making a decision, but as Wayne Gretzky once said, “You miss 100 percent of the shots you don’t take.” The lesson here: Take your shots, and live with the consequences, but trust yourself to make the kind of business decisions (that is, the right ones) that reap big rewards more often than not.
What was the point of this little Sam history?
I’d like to highlight two points.
- First, when a down market hit again, I didn’t panic and beat a hasty retreat. I saw the situation as an opportunity. I played both sides of the market during the pandemic, and I came away with a healthy gain in my accounts (around 30 percent total across all my portfolios over the last eighteen months). Because I was confident the market would rebound, I followed the advice of Warren Buffet who has said that you should generally remain “greedy when others are fearful.” The market and many other dicey situations in life often present themselves as opportunities again and again, and if you’ve learned the right lessons from previous experience, you stand to gain.
- Second, no matter how much money I lost or made in the stock market, the biggest growth in my wealth has always come from investing in myself. I have worked very hard to build a team, grow my businesses, and accumulate cash that I could plow into the next golden opportunity that presented itself. People approach me all the time and pitch ideas for businesses, but when they do, I ask myself such questions as this one: “How secure is my money (am I investing in a boom or bust business, or is it reasonably stable)?” Most important, I consider certain important benchmarks when weighing whether to invest in those projects or not. Does the business show enough promise to reach those benchmarks? In other words, are they attainable benchmarks? For example, what kind of yield can I expect? Generally, an active investor in a small business is looking for a minimum 25–30 percent return. On the other hand, a passive investor is generally willing to accept a smaller yield—a total annualized return of at least 15 percent. Those are pretty big numbers and aren’t attainable in many lines of business. I have found, however, that factoring in these benchmarks in my decision-making process narrows the spectrum of investment types I will consider as worth taking a risk on.
The market can certainly make you rich, but when you invest in yourself, you have a much better shot at controlling the outcome. You may have to deal with the headwinds of adversity from time to time, or you may encounter roadblocks along the way. You can choose, however, your response whenever the going gets tough: You can give up and walk away, or you can soldier on. Just like investing in the stock market, owning and running a business is not for the faint of heart. You are putting your time, money, and mental health on the line every day. Will you fight for your business and make it a success? True wealth seldom comes from working a 9 to 5 job (corporate execs excluded), but business ownership can pay huge dividends that dwarf what you might make in the market (over the long haul).
Your business is your career; think of dabbling in the stock market, on the other hand, as nothing more than a side hustle or a leisure-time activity like a hobby that may prove to be lucrative in the end, adding a few extra bucks to the till. Always invest in yourself first, however, because it’s generally the safest bet.