Five Habits That Self-Made Rich People Have

Five Habits That Self-Made Rich People Have

How you spend your time each day determines how your life unfolds. It determines, among other things, whether you end up rich or poor.

A researcher has looked at how the rich spend their time, and it’s only 4 hours each day that set the rich apart from other people.

The rest of the day, the rich and poor spend their time on more or less the same activities: sleeping, eating, commuting, working, and being with their family.

If it’s only a matter of 240 minutes that sets the rich apart from everyone else, what happens during those minutes?

Five habits unfold during that daily slot, says Thomas Corley, who has written the books Rich Habits and Change Your Habits, Change Your Life.

These are the five habits that set the self-made rich apart from everyone else. How would your life unfold if you developed these habits?

Here they are:

1. They Take Action Every Day to Pursue Dreams (1 hour)

We all have dreams.

The difference is whether we do something to make them a reality.

Rich people are constantly working on making their dreams come true. They spend at least 60 minutes every day taking concrete action that gets them a step closer to where they want to be.

Other people also have dreams, but many shake them off as being unrealistic or too hard to achieve. Some are simply too complacent to do the work.

The rich do the work.

But not only that.

They do the work very consistently every single day of their lives.

Day in and day out.

They understand the cumulative power of daily habits.

2. They Study and Learn Every Day (1 hour) 

They make sure to become better. Every day.

They study, learn, and practice. Every day.

The subject will differ, of course.

If your dream is to become a successful businessman, it could be working towards an MBA.

If your dream is to become financially independent, it could be taking a course in investing or reading new investment books.

The rich spend at least 60 minutes every day getting a little better at their profession or lucrative hobby.

The rich are not stingy when it comes to education.

They know that knowledge is crucial and that it must be prioritized. They are ready to pay to get the knowledge they need.

We all hit a plateau when we are learning something new, and we can be on that plateau for quite some time unless we make sure we get help from someone who is a step ahead of us and who can pull us up.

The rich are good at taking quantum leaps because they prioritize learning from someone who can help them learn faster.

If you are aware that you only have one hour a day to study, then you know that your time is precious, and you won’t spend it scouting for free information in YouTube videos.

3. They Take Care of Their Health (30 min.)

They spend at least 30 minutes a day on some form of sport or activity that keeps them in shape.

What does health have to do with wealth?

The body is your house. Good health is the foundation upon which everything else is built. Without good health, there is not much to build a rich life on.

When you stay in shape, the following happens:

  • You improve your mental acuity.
  • You prevent lifestyle diseases (it’s harder to make money if you get sick).
  • You prevent stress and burnout.

4. They Nourish Rich Relationships (30 min.)

They spend at least 30 minutes each day nurturing important friendships and relationships.

They don’t spread their attention to random people like the stranger in the pub.

They carefully prioritize the ones they want to dedicate their attention to.

As a wise coach once said to me: Friendships and relationships need to be selected just as carefully as stocks.

Invest your time in the best relationships.

So what activities do rich people spend those 30 minutes on?

  • They participate in professional networks.
  • They meet in person to catch up.
  • They make a call to a friend to hear how it’s going.
  • They celebrate milestones such as anniversaries and birthdays.

There are plenty of other ways to nurture relationships. The value investor Guy Spier writes thank-you letters to people in his network every single day. He spends time writing down what he appreciates and what they have done that he is grateful for.

He says it has a cumulative effect as the results of his letter writing come back in surprising ways.

He also says it’s been the best investment of his life – and it doesn’t cost anything.

5. They Engage in Relaxing Activities    

Like everyone else, they also need to relax and wind down.

What that activity is differs. For some it might be reading a fiction book, for some it might be drinking tea and knitting, for some it might be watching a TV show.

The difference between the rich and many others is that the rich do it for a maximum of one hour.

Many others could spend all four hours of “free” time on Netflix.

They Have a Daily Routine

We all sometimes fall into the New Year Resolutions trap.

That’s when we decide with a serious attitude that we’ll change our lives starting tomorrow.

It’s when we decide that next year we’ll run Boston Marathon in less than 3 hours – even though we haven’t built a strong running habit yet. It’s when buy an expensive pair of running shoes, but when the weather changes, we postpone the daily run, and before we know it, the habit fades away.

What you actually need to look at is the micro habit. You need to decide that every morning you’ll put on running shoes first thing. Just that. The micro habit of choosing the right shoes.

The rich are really good at building daily micro habits, so they get to spend time every day on pursuing their dream, learning new things, staying in shape, nurturing rich relationships, and winding down in a healthy way.

It’s all about building the habit so you don’t have an internal debate about running, studying, or calling your best friend.

It becomes just as automatic as brushing your teeth.

The running shoes almost tie themselves on your feet.

Is there one micro habit that you can build today to free yourself in the future?

Don’t forget to download my e-book Free Yourself where you’ll learn to invest as one of the best – super charge yourself through the plateaus. You can download it here.

How to Attract Money Like a Billionaire

How to Attract Money Like a Billionaire

Not many people think about their relationship to money.

But we all have one, and it’s different depending on your personality and your experiences in life.

Here are four different money attitudes.

Which one are you?

And which one would you like to be?

1. The Survivor

This person is playing not to lose – or maybe not playing at all, but sitting on the benches, watching others play on the field.

The Survivor is living paycheck to paycheck and just getting by.

This person rarely invests in stocks because they don’t think long term.

They prefer to buy a lottery ticket.

This probably won’t be you, as The Survivor isn’t interested in reading blog posts about investing.

2. The Thrifty Type

This person operates from a mindset that wealth is about saving money and keeping money – and they avoid using it as much as possible.

If you are here, you focus on reducing expenses, chasing deals, and saving.

This person will embark on a lot of DIY projects to save money, but in the process, they’ll waste time.

Typical signs of The Thrifty Type:

  • They are always looking for things on sale.
  • They’ll buys Christmas presents on Black Friday or Cyber Monday.
  • They don’t mind getting up at 5 a.m. to fight the crowds if they can save a couple hundred bucks.
  • They’ll do all the household chores themselves.
  • They have a tendency to hoard when they see things on sale.

Their operating system tells them that money is more important than their time.

3. The Pleasantly Wealthy

This type no longer has a fixation on money. The Pleasantly Wealthy has let go of the idea that saving money is the answer to everything.

Money becomes a tool used to solve problems and make life more comfortable.

This person has a mindset that makes it easier to enjoy life and get the best out of it.

This person wouldn’t dream of spending half a day hunting sales, because time is much more valuable than money.

Instead of price, this person focuses on content, quality, and good experiences.

The Pleasantly Wealthy doesn’t hesitate to hire staff such as cleaners, a nanny, and a gardener to overcome all possible inconveniences in life.

4. The Abundantly Rich

The Abundant Rich believes that there is always enough money. They see money as an infinite resource.

This person operates on the belief that money spent comes back manifold.

This is the person who books first class and who spontaneously buys an upgrade.

The Abundantly Rich doesn’t look for deals and doesn’t like to haggle over the price. It would ruin the experience. It would be like a dirty stain, and this person knows instinctively that bargain hunting is toxic to their money mindset.

This is also the friend who loves to give things away because it creates joy.

It’s the friend who spontaneously pulls out the credit card after dinner and says, “It’s on me”.

Beneath the surface is a belief that when they give something away, it comes back many times over – without them being able to see how.

They don’t expect to get anything back from the person they’re giving to – that would be a transaction and not a true gift. They just know that it will probably come back.

Their operating system tells them that they get everything back energetically. That’s why they don’t like sales and bargains.

When The Thrifty Type meets The Abundantly Wealthy, conflicts arise because their mindset and operating system are in opposition. If they are married, this will be directly problematic.

One will go after deals while the other will splurge on first class to get the most out of experiences.

Can you recognize yourself?

What was it like discovering who you are?

I can recognize myself in several places.

I have organically moved through the different levels.

That’s reassuring: it’s not static. You can decide to change your money mindset.

How do you feel about billionaires?

How do you feel about people who live first class?

Does it irk you?

That’s a sign that you perceive money as a limited resource.

You subconsciously think that if someone gets a lot, there is less for you.

What’s the problem with that?

The problem is that you are repelling money.

If you believe money is limited, you will feel bad about receiving wealth because subconsciously you’ll think you’re taking something away from someone else.

How do you progress?

It starts with you being aware of what level you’re at and deciding to upgrade.

If you’re The Thrifty Type, you need to spend money on solutions that buy you more time.

Hire a cleaner, a gardener, or a nanny. Pay someone to do something that you would normally do yourself. Use that extra time you get to make more money or improve your skills.

Quit pursuing deals.

It’s a pattern you should stop. Take pride in paying full price – especially if it makes life a little easier for you.

Always ask yourself: what’s the easiest / most comfortable / most fun solution?

If you are The Pleasantly Wealthy now, you want to look for more luxury in your life.

Ask yourself: how do I get the very best experience? Where is first class here?

Exercise: The Billionaire Mindset

Next time you pay for something, imagine how the money flows.

Let’s say it’s a service, like a trip to the hairdresser.

Imagine how the money you pay makes your hairdresser happy and how she spends the money in her life.

Be specific. Visualize all the good the money creates as it’s being spent again and again. Go full circle by letting the money come back to your life.

Can you see that money isn’t a limited resource?

Can you see that the same money can be spent multiple times?

Can you see that money is like energy?

Do this exercise every time you spend money. It will create little miracles in your life.

Both type 3 and 4 are good at making money grow by investing in stocks. You can learn how to invest with my free e-book here.

Five Reasons to Become Financially Independent

Five Reasons to Become Financially Independent

 

Why even bother?

Why postpone your spending so you can invest and have more money for spending in the future?

What if you’re happy with your life and your job as it is?

I’ll tell you why.

It’s my firm conviction that everybody should invest purposefully to become financially free.

Everybody.

Including the person with a great career. 

Including the person who feels safe because her partner is providing for her.

Including the person who feels like the future is golden.

Why?

It’s called prevention.

It’s like eating fresh vegetables and working out even though you aren’t sick now.

It’s one of the steps in creating a wonderful life.

Here are five specific reasons why you should invest in stocks now in order to become free later:

Reason No. 1: Avoiding Adding a Crisis to a Crisis

Your life will take its own turns.

Surprises are part of life.

It could be sickness, a divorce, a dismissal, a global pandemic, or a sudden death in the family.

Yeah, we don’t really want to talk about that, and that’s why most people avoid planning for disasters like these.

It’s like facing the pictures of the starving children in Yemen. It makes you feel uncomfortable, and instinctively you want to scroll on.

Yes, it’s unpleasant thinking about how something can disrupt the path you’re on.

But that’s the nature of life.

We’ll be surprised, challenged, and we’ll overcome.

But we have to get through the difficulties, and that’s why you need to do some preventive work.

You need to make sure that a crisis doesn’t become bigger than it should be.

If you’re going through a divorce worrying about money, you’re adding one crisis on top of another crisis.

If you get laid off and worry about your finances, you’re adding one crisis on top of another.

If you get sick and have to worry about being able to keep your job while trying to recover, you’re adding one crisis on top of another – making it more difficult to focus on healing.

Being financially free will make you stronger in life and better equipped to handle the challenges life throws at you.

Reason No. 2: Being Able to Choose From the Top Shelf

When you are financially independent, you have more freedom to build the life of your dreams.

I don’t mean just material stuff like adding another designer bag to your wardrobe.

I’m talking about the big decisions in life and the experiences you can have:

Like resigning impromptu if your boss is pestering you.

Like taking a year off to travel around the globe.

Like deciding to have a child without having to google the cost of daycare.

Like exploring a hobby, even if it’s a bit extravagant.

Like pursuing an infatuation even if the person lives in another state or country.

Those kinds of choices. The truly important choices.

Reason No. 3: Being Able to Spend Time With Your Loved Ones

If you’re dependent on a salary, there will be situations where you’ll be at your desk wishing you were with your family instead.

Maybe your family is gathering for a celebration, and you can’t be there because work is calling.

It can be something negative you need to handle, but can’t.

When my mother died, I was spending most of my time at work.

The doctors turned off the machines that were feeding her because they said it was her wish. She had had a stroke, was unable to move much, but was conscious. We knew she only had a week left. She was dying slowly in a hospital bed.

Most of that week, I was at work. I came after work when I could.

It’s a week I can never have back.

Reason No. 4: To Prevent Stress

You’re more inclined to get stressed if you worry about your finances.

That’s a fact.

If you know that you can always provide for yourself and your family no matter what happens, it’s easier to shrug when things don’t go your way.

It won’t bother you as much if your boss is giving you a hard time.

Sometimes small things become huge when something else is worrying you.

Parents who don’t feel safe financially have all blurted out stuff at their children like “Money doesn’t grow on trees” or “Are you insane? Do you know what that costs?”

That stops when you know with certainty that there is always enough money for you.

Isn’t that a wonderful thought?

Try saying it out loud: “There is always enough money for me/us.”

How does that feel?

Reason No. 5: Being Able to Provide for Your Family for Generations

Investing in stocks isn’t only about you.

It’s about your family. It’s about all the people you care about and the ones who haven’t been born yet.

You’re building wealth, and while you’re doing that, you’re building their future too.

You can do that in several ways.

You’re your children’s most important role model. If they see and hear you talk about investing, there is a higher likelihood that they’ll be responsible with their money too.

The other way is to invest for them.

I’ve opened savings accounts and retirement accounts for my two boys, and I actively invest the money on their behalf.

My boys are still small and there’s plenty of runway to make a modest amount of money become millions.

Their savings can really grow, and it will have a big impact on how their lives unfold.

Now what?

Are you ready to invest in stocks?

Are you ready to take charge and steer your finances towards freedom and wealth?

Sounds good.

Now you need more information about how to do it.

Your first step is to browse around the blog and read the free e-book I’ve written for you.

Next is to attend a webinar.

If you download the e-book, you’ll get on the e-mail list, and I’ll let you know when I do another webinar.

Make sure to download the e-book Free Yourself right here

 

 

 

Ten Reasons You Stop Yourself From Investing in Stocks

Ten Reasons You Stop Yourself From Investing in Stocks

You’ll find them all over, but you don’t notice them.

Who?

The people who want to invest in stocks but never do.

They’ll read business news, hang out in Facebook groups about stock market investing, and some of them might even read this blog post. They’ll do anything to make their money grow.

Expect one thing.

Actually invest.

Wanting to invest but not doing it is a pretty common ailment.

They’re like the person with tons of cookbooks on the shelves but with takeout food on the dinner table.

They’re like the person who loves watching do-it-yourself programs about people who built entire houses with their bare hands, but who never get around to fixing that handle on the bathroom door.

What’s actually stopping them?

There are ten reasons why people stop themselves from investing.

If you haven’t invested yet and want to, do you recognize yourself in any of these ten points?

1. They Don’t Understand the Value of Time

Richard Branson says that any successful entrepreneur knows that time is more valuable than money.

When you invest, time makes a big difference.

The sooner you get your money invested, the sooner it will grow exponentially.

Here’s an example.

Let’s say you invest $5,000 for a child’s retirement. You get an average return of 15 percent for 60 years. How much does it turn into?

Hold on to your chair. It turns into $19 million.

Let’s say you wait until you have $500,000 and invest with an average return of 15 percent for 10 years.

How much does it turn into?

It turns into 2 million.

In other words, get at it.

2. They Make It Too Complicated

They think it’s super complicated to invest, and they believe they have to read half a library before even signing up for an investment course.

Maybe they even have the idea that it will ALWAYS be too difficult. They might make excuses to themselves like not being good at math, not being good with money, not having the right mindset.

3. They Procrastinate

They know they have a tendency to put things off, and somehow they are almost proud of it.

They tell themselves that it’s just who they are.

It becomes their excuse for not getting it done.

The real reason they hide behind a shield of procrastination is that they think investing is dangerous and overwhelming, and that’s the real reason they push it off.

4. They’re Afraid of Making a Mistake

What if they fail? What would people think of them? How would that feel?

The human mind is actually more motivated by avoiding pain than by gaining something new.

These people spend time thinking of all the negative consequences.

But if you don’t begin, you really fail. Remember that.

5. They Don’t Live According to Their Values

Either they aren’t aware of their values, or they just don’t live according to them.

They might want financial freedom and a feeling of peace and security, but they don’t take action to get it.

They’re like the person who worries about the environment but who keeps eating huge steaks and driving to work in a big diesel car.

If you want financial freedom, but you don’t invest to make your money grow, you’re not living out your values.

6. They Try to Time the Market

They think the stock market is too expensive and wait for it to dive.

The problem with that is that none of us knows when that will happen. Not even Warren Buffett can time the market.

When the correction comes, they still hesitate, because they fear that it will dive even more, and they still don’t invest.

They miss the opportunity. Every day. 

7. They Fear Getting Rich or Too Successful

Sounds unlikely?

Well, take into consideration that this isn’t a very conscious point. It’s a subconscious fear of what your family, friends, and neighbors might think if you “have too much”.

A lot of us have been told that we were “greedy”, “selfish” or simply just “too much” when we were children.

I grew up around left-wing politicians, and as an adult who took up an interest in investing, I was always afraid of being called “a capitalist”.

When it finally happened, it felt like a relief. It wasn’t that bad.

Yes, there will be people who will think badly of what you do and who you are, but it’s better to get them out of the way early on, so they don’t hold you back any more.

Shrug and move on.

Be honest about what you do and who you are.

8. They Want to Be Rescued

This is also a subconscious mechanism.

None of us would be proud of having an almost childish need of being seen and being “saved”.

It might be the woman who wants a man to take care of her.

Or it might be a man who wants mom and dad to show their love by helping him financially.

It can also be the person who plays the lottery and daydreams of a big win.

9. They Lack a Strategy

They think that buying shares is just buying, and they don’t have a strategy or a plan.

This reminds me of myself as a teenager when I tried to make my first meal.

I went to the store to look around and buy something on the fly and “just” cook it. 

I bought chicken hearts and cream.

The plan? There was no plan, I just remembered that eating the heart of the chicken was my favorite part of the chicken as a child (yes, the chicken came with all the parts). My second favorite thing was a cream-based sauce.

I went home, fried the chicken in a pan and put cream on top.

Let me tell you, chicken hearts in cream is a nasty dish. I still get nauseous just thinking about that meal.

For years after that, I told myself that I simply wasn’t good at cooking. As if my destiny was determined by that one experience.

How would my first cooking experience have turned out if I had found a recipe, made a shopping list from that, and simply followed the recipe?

You can do the same with investing. You can follow a simple recipe so you know what to put in your cart.

10. They Think They Have To Figure it Out Alone Without Help

They think they have to do it all alone at the kitchen table without getting any help. 

They don’t even know that they can get help.

Think of something you have learned and mastered in life. How did you learn?

I learned to read and write in school. I learned to knit with the help of an older relative. I learned to drive by taking driving classes. I learned to swim by taking swimming lessons, and I have even taken some as an adult to get better.

How come many of us expect to figure the money stuff out at the dining room table at night?

What To Do If This Is You

If you recognize yourself in any of these points, congratulate yourself.

You have just become aware, and now you can do something to change it. If you hadn’t become aware, you would have continued on the same path.

The first step is to get some knowledge.

I have condensed my 20 years of experience as an investor and financial journalist into my e-book, which you can download here.

Once you are on the email list, you’ll get a weekly tip or blog post to keep you on track.

You can join the investing community I’ve created on Facebook right here. You are no longer alone. 

Don’t forget to read my free e-book that explains my whole investing process. You can get it here.

 

 

 

The 10 Most Important Characteristics of the YOLO Investor

The 10 Most Important Characteristics of the YOLO Investor

Phillip, a first-year student, was just 21 years old and still living with Mom when he bought his first shares.

His mother, who had taken several investing courses, had been trying to get him interested in investing for the last five years.

Initially, she was happy to see him invest in stocks. When Philip asked if he could borrow $5,000 to invest, she immediately said yes – no questions asked.

She later regretted it when she discovered he’d placed all the money in one stock: GameStop.

“I know I can lose all the money, but I’ll probably get it out before then. Besides, if I lose the money, I lose the money,” he told Mom when asked.

His interest in investing picked up during the first lockdown when both classes and his birthday party were cancelled. He spent most of his time reading the news and chatting on social media while doodling at the kitchen table in his mother’s apartment. Stocks hit the news with a plunge and a quick rebound.

He saw the V-drop shape and thought something like, ‘Hey, maybe stocks aren’t as boring as I thought. Mom’s onto something.’

That’s when he began investing.

First, it was a way to make a few quick bucks. Then he discovered there was a big community online of people just like him. He also realized that he got a kick out of it when he made some quick gains.

How did things turn out for Philip’s GameStop investment? We’ll never know, because Philip is a composite character of several people I’ve talked to.

Maybe he sold before the stock imploded. Maybe he lost most of it.

Philip is a YOLO investor (You Only Live Once), and people like him are getting a lot of attention in the stock market news these days.

It’s even a verb. You can YOLO in the stock market. These YOLOing YOLOers can influence how the market will develop in the future.

The fact is, there have rarely been as many private investors in the stock market as there are right now.

Private individuals now account for almost as much of the volume of the US stock market as institutional investors such as pension companies and mutual funds, according to numbers from Bloomberg published in this Financial Times article (sorry paywall).

Not only are private individuals flocking to the stock market, but this new investor, the YOLO, has emerged, and they’re not behaving like the rest.

YOLO investors arrived with the pandemic.

Like Philip, they were tied to a screen at home during lockdown, and many of them have gained access to a bag of money they did not have before, like the US stimulus check or other corona-related subsidies.

What else do we know about these YOLO investors?

1. They Gamble

The YOLOs invest short-term and aim to make their money multiply in a few days or weeks.

They approach the stock market as if it were a one-armed bandit, betting on hitting the jackpot. They go for profitable long shots, not incremental gains.

Saving for retirement is more distant to them than a space station.

They invest as if there’s no tomorrow – that’s the whole idea of you only live once.

2.  They Invest Borrowed Money

They use margin on the account, they borrow money from various sources (like “mom”), and they use leveraged products.

They’re simply not at all afraid of losing borrowed money. 

3. They’re Poorer

They have less money than previous generations of private investors.

How much do they have?

Typically between $1,000 – $5,000 in savings, according to the article from FT – and many have no savings at all. If they don’t have savings, they’ll borrow the money.

By comparison, the typical private investor during the dotcom bubble had about $50,000 to invest.

4. They Are Younger

They’re in their early 30s – and often much younger.

Compare that to the generation of private investors who invested in the dotcom bubble. They were about 50 at the time (so around 70 now).

The YOLO investors are so young that they were still playing with their LEGOs when the financial crisis raged. A serious stock market crash belongs to the dusty history books.

Which might be one of the reasons they don’t seem to fear a crash.

A 12-year-old bull market is an eternity if you’re in your 30s or younger.

5. They Use Social Media to Make Investment Decisions

They’re more likely to trust a stranger on social media than a financial expert on TV.

They grew up with social media, and social media is where they socialize and develop their worldview.

They’ll discuss stocks and private details about their financial position with strangers online, no problem.

They aren’t afraid of writing something like:

“I have $10,000… What should I invest in if I want the money doubled in a year?”

What’s astonishing about them is that they’re likely to do whatever a stranger with an alias tells them to do.

6. They Invest with an Activist Mindset

They invest in Tesla because they want less air pollution.

They invest in Beyond Meat because they cheer for Greta Thunberg.

They invest in GameStop to drive hedge funds out of their short positions.

They invest in cannabis stocks because they want cannabis products.

They invest in bitcoin to defy the government monetary policy (the eternal printing).

They invest because they want their money to make something happen in the world.

7. They Love All Tech

Their favorites are fintech, biotech, blockchain, all crypto, gaming, and Tesla.

They admire Catherine Wood from Ark Invest and the SPAC king Chamath Palihapitiya – they might even have one of them on a poster or a coffee mug.

8. They Use Commission-free Stock Trading Apps

They trade through commission-free apps on the fly.

They don’t need to sit themselves down in an office chair at a big desk with a steaming cup of coffee and a pair of reading glasses to enter a stock.

They grew up playing with a smartphone while eating cereal, and they’ll happily trade stocks on an app while taking the subway or chatting with a friend (or a stranger online). 

9. They Love Fractional Shares

On a platform like Robinhood, it’s possible to buy so-called fractional shares, which is a small part of a stock.

They love this stuff, because they don’t always have enough money to buy the whole thing.

For example, most of them don’t have $3,000 for a share in Amazon or $2,000 to buy a stake in Google.

10. They Don’t Care About Compounding

They invest now to get money now. They’re in it for the instant gratification.

Investing to get solid in retirement doesn’t rhyme with you only live once.

How will YOLO Investors Affect Your Stocks Going Forward?

When a large group of shareholders enters the stock market and when they behave atypically, it can affect the entire market.

Since “YOLOing” is a new phenomenon, none of us know exactly how they’ll behave going forward – they’re really a bit of a joker in this stock market game.

But here’s my best bet on what they’ll mean for you and your stocks:

A. Greater volatility.

When YOLO investors jump on a stock like a swarm of grasshoppers, the stock price could potentially rise to astronomical levels and implode afterwards, as we saw with GameStop.

B. More uncertainty.

We don’t know how they’ll react to certain events. They aren’t investing in their retirement funds, and they don’t think long term, so certain events might trigger them. These could be:

  • Taxes: What happens when they realize they have to pay taxes on their gains for 2020? Are they even aware? As they don’t have a lot of excess cash, tax liabilities in the spring might cause shares to plunge if they have to sell shares to afford paying them.
  • A correction: How will they react to a correction? Will they panic? Or stay cool? The fact that they have no experience with the financial crisis might mean they’re in for a surprise. On the other hand, many YOLOers began investing after that V-shaped plunge during the first lockdown – this might suggest that they aren’t afraid of stock volatility. However, they weren’t there for the steep plunge. They came in with the reversal and only enjoyed the ride up.
  • Reopening: What happens when all the covid restrictions disappear? They entered the market pushed partly by boredom. Will they sell all their shares and fly to Bali when the world reopens?

What should you do?

Now, more than ever, it’s really important to check the facts and the numbers on a company before you invest.

When volatility and herd mentality come into play, it’s vital to make sure there’s a connection between price (stock price) and value (value inside the company).

You have to go through a checklist (you can download mine here) and do some basic calculations.

My favorite way to check what a company is worth is using Warren Buffett’s owner earnings calculation, which you can learn about in my e-book right here.

Don’t forget to read my free e-book that explains my whole investing process – including my favorite way to calculate what a company is worth. You can get it here.