If you want to learn how to shoot a basketball, emulate Steph Curry. If you want to learn how to cook, watch Chopped. If you want to get rich, do what rich people do…right?
But 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 financial media believes this, which is why headlines like these are ubiquitous:
The guy who predicted the Financial Crisis and made a killing? A trade so legendary that he was later portrayed by Christian freakin Bale? I gotta find out who makes electric motorcycles and get 100 shares, stat.
If “Mr. Wonderful” can’t find room in his budget for coffee, maybe I shouldn’t either.
This one is a double whammy. Not only are they rich, but they also have inside information? I’d be a dope not to sell.
The problem is that these people are playing a completely different game than you. It may seem the same, with everyone ultimately wanting to make money, but that’s like saying speed skating and bobsled are the same because the goal in both sports is to go fast. That is where the similarities end.
The rich and famous make investment choices that align with their lifestyles. Following their lead would be like following Shaun White into the halfpipe. Allow me to explain why…
Michael Burry is a hedge 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 has shorted Tesla, bought swampland, and called for “the mother of all crashes” in crypto. You’ll see plenty of articles about what he may be trading at any point in time because “Genius Who Called the Financial Crash 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.
Kevin O’Leary, as viewers of Shark Tank know, has a showman’s flair. He has a knack for showing up in these “personal finance” type articles, and it isn’t because he gives great financial advice. Spending a few bucks on coffee isn’t going to wreck your retirement, especially if you are already reaching your savings targets. The next time you see O’Leary offering advice, take it with a grain (or fistful) of salt—this is the same guy that spends $3,000 a year on haircuts, AND HE’S BALD!
You can follow him into the halfpipe, but wouldn’t you rather enjoy a good cup of coffee occasionally?
Finally, 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 here is simple: You won’t find the right investment strategy by listening to Burry, O’Leary, CEOs, or any “experts” on CNBC. 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. They might even buy you a cup of coffee and watch Shaun White’s greatest highlight with you.
Disclaimer: Truepoint Wealth Counsel is a fee-only Registered Investment Adviser (RIA). Registration as an adviser does not connote a specific level of skill or training. More detail, including forms ADV Part 2A & Form CRS filed with the SEC, can be found at TruepointWealth.com. Neither the information, nor any opinion expressed, is to be construed as personalized investment, tax or legal advice.