“If you want to learn how to shoot a cover drive, emulate Sachin Tendulkar. If you want to learn how to cook, watch Sanjeev Kapoor. If you want to get rich, do what rich people do…right?”
This is a often repeated fallacy that imitating rich and famous people’s investing strategies will result in success, however nothing could be farther from the truth. The intuition is obvious—if that person is rich, they must know how to handle their finances. And if they’re doing something with their money, I should probably do the same thing.
The problem with this strategy is that their investing goals might be completely different than yours, aside from growing your wealth, there might be nothing common between your financial dreams and theirs. The rich and famous make investment choices that align with their lifestyles.
A famous renowned mutual fund manager that can, and does, change strategies in a heartbeat. If he’s bullish on electric motorcycles on Monday morning, he may sell the entire position by Thursday afternoon. Within the last few months, he may have short sold the stock of any automobile company, and called for “the mother of all crashes” in crypto. You’ll see plenty of articles about what Mutual Fund Managers may be trading at any point in time because “Guess what this ace investor is Buying…” is a click-inducing headline. But it’s impossible to track his whipsawing strategy by following the headlines—you’ll only know his next move well after it’s made. You can follow him into the halfpipe, but you might end up in traction.
the CEOs and insiders—is it possible that these folks are selling because they know disaster is around the corner? Sure. But let’s remember that these people sometimes just need cash, too. Most of a CEO’s pay doesn’t come in the form of a biweekly salary; it comes in stock-based compensation. So, whether they want to buy a boat or need to pay their kid’s tuition, selling stock will be the primary way to get cash. They might also be selling as part of an ongoing plan to reduce their concentration in their company’s stock. Diversification is a tenet of Investing 101, hardly an ominous sign of impending doom. You can follow them into the halfpipe, but you might be misinterpreting their motives.
The lesson is simple, the right investing strategy can’t be found by blindly imitating rich people or by listening to “experts” on the news channels every morning. Investing is a very personal discipline, and you don’t know their time horizons, motivations, or even their personal finance acumen—plenty of rich folks end up going broke.
Ultimately, you can’t find the “right” strategy by following anyone in the world because the search begins within YOU. Your goals, your saving and spending habits, and your personality are unique and crucial inputs to your investment strategy. If you need help matching YOU with your investments, it’s time to talk to a financial advisor. The best advisors aren’t the smoothest talkers or those with the most expensive suits. The best advisors are those who truly listen to understand you, then devise a strategy that fits.
Source: Don’t invest like a billionaire by demystifyingmarkets.com
Asset Multiplier Comments
- Investing is a deeply personal exercise that is based on a lot of parameters which differ from person to person. Blindly following rich people or investing gurus for financial advice is not the best approach to investing.
- Everyone’s income, savings, goals regarding investing, expectations from wealth generation is different, so the best way to start investing is consulting a financial advisor who can help us with a tailor-made plan for investing.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”