On Saturday afternoon, a friend of mine called me and said “You don’t have to watch the Illinois game.” I said, “They lost right.” He said, “They were up 25-7 and the quarterback had 175 yards passing in the first half. He ended up with 190 yards passing for the game because they kept running the ball to milk the clock.” I said. “They were playing not to lose.”
I think all fans hate it when teams play not to lose. Every sports fan wants their team to continue pouring it on, go for the jugular, forget the prevent defense!
Then again late night Saturday I was sitting at a No-Limit Texas Hold’em Poker tourney. I had done fairly well to become chip leader with 9 players left. I began to tighten up. I had all these chips and I didn’t want to lose them. An hour later I was the short stack. Wow! How did that happen? I was playing not to lose. I had lost my aggression and was folding almost every hand. Luckily I came back and won the tourney.
What does this have to do with investing? I hate to say this but many investors are investing not to lose. When it comes down to investing, one’s first thought is usually, “Am I willing to lose this money or can I afford to lose this money.” While these are both very responsible questions, they stem from a mindset that limits your potential.
I’ve fallen into this mode. I was very active in real estate over the past 3 years. When the market turned late last year, I sort of went into a shell. I had done so well until then that I began to fear losing my equity and net worth. That mindset was reinforced by all the media bubble-talk, and it made me sit on the sidelines the past 8 months. I am a firm believer that you can make money in any market. I had let my fears get to me.
Yesterday I was sitting and Barnes & Nobles reading the new Kiyosaki & Trump book and came across this passage (from Why We Want You to Be Rich):
One day, during a brief meeting in his office, Donald simply said, “I invest to win. Don’t you?” With that statement the defining difference appeared. He and I invest to win, while others invest not to lose.
We have talked here about the advice, “Save money, get out of debt, invest for the long term (generally mutual funds) and diversify.” Late that afternoon, Donald and I discussed how we did not focus on saving money. In fact, we are both millions of dollars in debt – but good debt. We do not diversify, at least not in the context that most people use the word diversify. And while we are both long term investors, we do not invest in mutual funds, at least as a primary vehicle. Why? Because we invest to win….
Most other financial experts are telling people to play it safe, to live below their means. They are telling people that investing is risky and that they need to save and avoid losing. The experts aren’t focused on winning. They’re focused on not losing.
This just reaffirmed what I’ve been thinking. Maybe it’s a sign. Three different situations, same result. With that, I put an offer in for that duplex in Tucson.