Passive Investor Tips is a weekly series hosted by full-time passive investor and Best Ever Show host, Travis Watts. In each bite-sized episode, Travis breaks down passive investor topics, simplifying the philosophy and mindset while providing tactical, valuable information on how to be a passive investor.
In this episode, Travis discusses the 2,000-year-old philosophy of stoicism. He explains that stoicism helps you to train your mind to overcome fear, uncertainty, and obstacles along the way to becoming a better person — or, in this case, a better investor.
Travis outlines three different elements of stoicism that helve helped him on his personal journey to becoming a full-time passive investor:
1. Learn to Focus on What You Can Control
“You have power over your mind — not outside events. Realize this, and you will find strength.” —Marcus Aurelius
When you are a passive investor, lots of things fall outside of your control. These include government decisions, different regulations and programs, actions taken by the Fed, weather, storms, tenant issues, and more.
You can, however, focus on things that are within your control in order to simplify your investing strategy:
- Do proper due diligence before making an investment.
- Invest in deals that are conservatively underwritten.
- Have proper insurance coverage on the real estate you are investing in.
- Set aside adequate cash reserves for unexpected events.
2. Be Tolerant with Others
“Be tolerant with others and strict with yourself.” —Marcus Aurelius
Financial education is not necessarily widespread today. Most people have not taken the time, energy, and effort to become experts in investing. What might seem like common sense to you as a passive investor might not be so obvious to a neighbor, colleague, or coworker. It’s important to be understanding and forgiving of those who, as Marcus Aurelius would say, have been cut off from the truth.
3. You Can Be Twice as Rich by Desiring Half as Much
“By desiring little, a poor man makes himself rich.” —Democritus
It’s easy to get caught up in the success cycle, always wanting more things and more money. However, if you take a step back and think about what brings you the most happiness, you’ll likely find that many of these things are free or cost very little. It’s important to ask yourself what you're really after and how much is enough. The first episode of Passive Investor Tips covers this topic in more depth.
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TRANSCRIPT
Travis Watts: Welcome back, Best Ever listeners. I'm your host, Travis Watts. Today's episode is about how stoicism can make you a better investor. Disclaimers, as always, never giving anybody financial advice; not a financial adviser. Please always seek licensed advice when it comes to your own investing.
With that top of mind, this episode's gonna be fun. I've been studying stoicism for years now, I'm sure I could make an hour-long episode on this topic, but in respect of your time and to the purpose of what this show is all about, I'm going to keep this very consolidated tight, right to the point, no fluff, and we're gonna dive right in.
So if you're not familiar with stoicism, what I'm talking about is basically a philosophy that dates back about 2000 years ago, but is still extremely relevant to today's world. And it's because it's about psychology, it's about humans, it's about obstacles. So we still encounter the same things today that we had even 2000 years ago. At its core, stoicism is really about training your mind and your psychology and how you see things, so that you can better overcome fear, uncertainty, obstacles, and all along the way, becoming a better person, and in this case, becoming a better investor.
So I'll skip all the long-winded history, we'll get right to the point, and I just want to highlight three different elements of stoicism that have helped me in my personal journey of being a full-time passive investor. Without further ado, let's jump in to number one, which is learning to focus on what you can control. "You have the power over your mind, not external events. Realize this, and you will have strength." That is a quote right from Marcus Aurelius. He was one of the Emperors of Rome.
So when you're a passive investor, or let's just say any type of real estate investor at large, there's a lot of things out of your control - what the government decides to do, different regulations and programs, what the Fed does, weather and storms and tenant issues and kitchen fires... There's so many things that we could stress out, worry about, but at the end of the day, these are largely not in our control. So it really doesn't do any good to worry about these factors, or let them hold you back from taking action and investing in any form of real estate. They're largely out of your control. And at the end of the day, life is life and people are people, right? So the things that are in your control would be things like doing proper due diligence before investing, or deciding to conservatively underwrite a deal, or to invest in a deal that's conservatively underwritten. Having proper insurance coverage on the real estate you're buying or investing in, having adequate cash reserves set aside for the unknown, unexpected events that will inevitably arise in one form or another. Those are just a few examples of things that are in your control, that will help simplify your investing.
Number two is to be tolerant with others. Another great quote that comes from Marcus Aurelius is to be tolerant with others and strict with yourself. So his basis for this, again, more than 2000 years ago, was education was not necessarily widespread; most people were not formally educated, and you could really say the same thing about today, in terms of financial education. Most people have not taken the time, energy and effort, like you and I, most people are not listening to this podcast, unfortunately, so that gives you an eye a different vantage point and an upper-hand where most people don't have that.
So as a passive investor, for example, it may seem like common sense to you and I that we might invest in a real estate deal passively that has 20% annualized cash flow right out of the gate, maybe 100% equity upside potential within a three-year timeframe... That sounds like a pretty decent deal to me, but not everyone would agree with you. Instead, what you'll often see is that your neighbor, or a colleague, or a co-worker, someone's putting their life savings into something like a certificate of deposit at the bank. They're earning 1% annualized return on their money, or they're diving in headfirst into some highly speculative investment that they know nothing about, in hopes that they're going to hit it big, without really understanding the fundamentals or the risks that may be associated with that; that unfortunately, my friends, is just life, and that's how it goes. So we have to be understanding and forgiving of those, as Marcus Aurelius would say, have been cut off from the truth.
Break: [00:05:36.20] to [00:07:32.08]
Travis Watts: Number three, you can be twice as rich by desiring half as much. This stems from a quote from Democritus. He's once said, "By desiring little, a poor man makes himself rich." And I've talked about this concept in past episodes; it's easy to get caught up in what I call the success cycle of wanting more and more, more things, more money... After all, that's the American way, right? But if we take a step back and we really think about what brings us the most happiness, I bet you would find that, for example, friends and family are somewhere up there near the top, perhaps your health, maybe being charitable and feeling good about helping someone else along their journey, maybe being out in nature, or meditating, just taking a break from the hustle and the grind... And if we analyze that, a lot of these things are free or a very little cost. So that begs the question, what are you really after, and how much is enough? So check out episode one of Passive Investor Tips if you haven't already, for a deeper dive on those specific topics. But at the very least, I'd just encourage you to write down what happiness means to you, and what things bring the most happiness and fulfillment to you. It's a pretty easy exercise, it could take you five minutes, and you might find some real obvious realizations in doing so. And you might find things like your original goal, let's say, with being an investor was "I want $50,000 per month passive income." You might actually find that that's more like $15,000 per month; maybe even $10,000 a month. So we're all different, I'm not telling you how to live your lifestyle or I'm not saying don't want fancy cars and big houses... I'm just saying, do those things really bring you the most fulfillment and happiness? It's worth questioning.
So these are just three quick takeaways from stoicism. There's a lot more I can cover, and there's probably more I will cover on future episodes. I'm a big fan of Ryan Holiday. He's just a guy out there in the industry who's taken these old writings and translations of stoicism and made them simple and easy to understand. So google him for some more info if you want to take a deeper dive on stoicism.
And the last thing I want to leave you with is a short story that I've never shared on a podcast or with the general public, but on my right arm, I have a tattoo, and that tattoo says Memento Mori, which is Latin, and the literal translation is to I remember your death, and remember that you're mortal. So at first glance, that sounds a bit disturbing, but it has a much deeper meaning, at least to me. Marcus Aurelius framed this with a quote that says "You could leave life right now. Let that determine what you do, say and think."
And the takeaway to me is that investing is not just about money, it's about creating an optimal lifestyle to bring more happiness and fulfillment to you and your family, while helping other people along the way. When I was 17 years old, I wrote a book, and it was my senior year of high school. And I didn't write a book because it was a school project, I didn't write a book for money or for attention, or for fame, or anything like that. I wrote this book to help peers that were in my school, that I saw struggling with their grades. And I titled the book, "How to achieve a high school 4.0 GPA with minimal effort", which kind of makes me laugh at that title as I look back on it. But that's what I felt was most important to do at that time.
So in honor of Memento Mori, and Aurelius' quote on what you do, say and think, are you doing investments that are bringing you closer to your goals? Are you saying what needs to be said and helping others along the way? Are you thinking like a true professional?
So with that, to your success, as I like to say. Thank you guys so much. This has been another episode of Passive Investor Tips. I'm Travis watts, always happy to be a resource or mentor to you. Please share, like, subscribe, comment, share these episodes with people in your network that you think could find value from these.
This is going to be ultimately a 100-episode series that I'm making. It's about the mindset philosophies, strategies, formulas of being a passive investor. It doesn't always have to mean real estate, but I'm a big proponent of #passiveincome. Thanks so much, have a best ever week, and we'll see you on the next episode.
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