I’m all about getting educated about money, finance, and stocks and making your own investment decisions.
Sometimes, however, there can be some sound reasons for letting others invest for you instead of doing it yourself.
Over the last four years, I have blogged and made videos and content about making your own investment decisions.
But this week, I took a very important step in a new direction. I got a preliminary yes from 10 partners who are going to let me invest their savings through my new investment firm, Grünbaum Value Invest.
All of them would be able to do it on their own. In fact, 8 out of 10 have taken my 2-month long value investor course.
They are well informed and know how to select wonderful companies and invest in them.
So why do they choose to let me do it instead of doing it themselves? Because it makes sense.
In this blog post, I want to give you the five main reasons that my partners let me manage their money instead of doing it themselves.
1. Too Busy to Get It Done
Some of them have a full-time job, small or large children, a hobby, a house and maybe even a summer house as well.
Some partners would actually like to spend some time researching companies, but they can’t squeeze more time out of the week. It is already a completely juiced lemon.
As one of the new partners said to me:
“I have a baby, and we just bought a house. There’s still a lot of work in the house. I can’t see when I’ll have time to sit down and get it done.”
2. Too Nervous to Handle It Yourself
Warren Buffett says you don’t need to have a very high IQ to be a good investor.
The right mental attitude is far more important. Investing requires a calm mindset.
If you are very nervous when it comes to money, it may be a better idea to remove yourself from the immediate decision of buying and selling.
Money-nervous people tend to buy and sell at the wrong time because they are driven by fear. Fear of losing out and fear of losing.
As someone told me this week, “I get very nervous whether I’m making the right decision. What if the company goes bankrupt? What if all the money disappears? Even the thought of having to pay taxes makes me very nervous.”
This might make some people smile, but it’s no laughing matter to feel this way about money, bills, and investments.
Some people get uncomfortable just paying a restaurant bill. That type rarely becomes good at investing.
3. Need to Focus on Something Else That You Are Building
It’s not quite the same as not having time.
This is about the luxury of reserving your time for something you know you are even better at.
One of my new partners runs a successful business. He told me:
“I want to put my time in the business because that’s where I make my money, and I can make a lot of money there. It makes more sense to put my time there and let you handle the investments.”
4. Not Satisfied With an Average Result
One of my new partners has inherited some money that the bank has managed for the past 20 years. The bank has made a profit from managing the money, but the savings have stalled.
The verdict is very clear.
“It’s quite disappointing,” she says about it.
This comes as no surprise to me. I’ve talked to a lot of people who have been disappointed with the way the bank manages their savings.
They’ll often invest in a mixture of bonds and stocks. The bank clerk will ask the person about their tolerance towards risk, and most normal people will say that they don’t like too much risk because no one likes the thought of losing all their money.
This means that the bank will place a large part of the portfolio in bonds and in a low-interest environment, which is a lousy investment.
Let’s say they get an annual return of 4 percent and charge 2 percent in fees. That means there is only 2 percent left for the investor.
After inflation, this actually means your portfolio is shrinking.
5. You Do Not Want to Own a Bite of the Whole Market
Today’s popular DYI investment advice is to invest in Exchange Traded Funds (ETFs) that follow a stock index.
Following this advice, you will quickly own a small bite of everything.
If you buy a fund following S&P 500, you become a co-owner of 500 US companies.
Few people stop at one ETF, as this passive investing school advocates spreading over many investments.
Most people take this pretty far and buy many different ETFs. That means they end up owning shares in thousands of companies. As a result, they own a bite of the whole market.
It’s like going into the supermarket and saying you want to buy one of each item without looking at what you place in your cart. Do you get black oil, weapons, Russian companies, and companies that use child labor? Yes, you do.
If you want to be a responsible investor, it’s necessary to select your investments, just like a responsible shopper at the supermarket. Turn it over and look at what’s in it. Then look at the price. Is it fair?
Imagine half of the customers in a supermarket automatically bought one of each item in the shop regardless of the price and the quality? What do you think would happen with the prices?
Yes, they’d explode to an unreasonable level because they can sell anything. The index types buy no matter what. That is exactly one of the reasons behind this massive bubble we are in the middle of.
You Can Both Be Informed and Choose to Outsource the Process
If you choose to outsource the process, it doesn’t mean that you aren’t able to be a good investor on your own.
Something surprised me when I had conversations with my partners-to-be. The vast majority of them had taken my 2-month long value investor course.
Of the ten partners in the investment firm, eight are former course participants.
I have taught them how to analyze wonderful companies. Why spend time and money learning about value investing and then leave the decisions to me?
Because that makes the most sense to them, and in fact it’s a win-win situation for all.
As one of the new partners explained:
“I have in no way regretted taking the course. The way you have taught us to analyze a company gives me a feeling of security. I have confidence in the method. I just don’t have the time for it.”
It is a win-win situation to have informed partners.
When an investor is informed about the process of value investing and believes in the method, it means they can sleep peacefully at night.
It’s also a great advantage for the investment company to have informed partners who knows that a dive into the market is a great opportunity to the firm – not a threat.
They will be calm investors who can ask the right question at the right time.
To learn more about my investment method, you can download my book right here.