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Why I changed my investing philosophy 12 years ago? February 1, 2010

Posted by shaferfinancial in Finance, Uncategorized.
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Its worthwhile to tell my personal investing journey as a primer on my overall financial philosophy.  So many people I talk to these days are confused about the investing for retirement world and are fearful to make meaningful changes.

A little over twelve years ago, I was investing in a selection of mutual funds for two goals; retirement income and saving for a down payment for a house.  I was working as a college professor and had a retirement plan at work that was being funded with mutual funds [variable annuity per Florida law] and also had other mutual funds I had been funding for quite a while.  Being pretty good at math, a little voice in the back of my head kept going off that said something was wrong with this plan, it just wasn’t adding up!

So I decided to take part in a research excursion to find out everything I could about investing and wealth production.  I decided early on that the only meaningful data is that from folks who have accumulated wealth successfully.  This was a fateful decision as it lead me away from the financial planning industry, mutual fund sales folk, insurance sales folk, financial magazines, etc.

What I found was eye-opening.  There was no data that indicated what I was currently doing would be successful. In fact the data demonstrated the exact opposite.  About the same time it became apparent to me that I would not receive tenure from a university anytime soon, so that siren call of job security was pulled out from me.

You can imagine my feelings at this point.  Well, I made a pledge right there that I would try to emulate the wealth producers as best as I could.  Out into the private world of employment I went, including starting my own business.

But this story is really about my change in investing philosophy.  I soon realized that I could try to emulate Warren Buffett or I could buy Berkshire stock and learn as much as I could from him going forward.  I could emulate the wealthy folks investment philosophies or I could emulate the middle classes investment philosophies.

Well I chose to emulate the wealthy as best as I could.  The wealthy own about a quarter of their investments in [mostly income producing] real estate.  The wealthy own businesses.  The wealthy own large life insurance policies.  The wealthy, when they do invest in the stock market do it with individual stocks.  The wealthy aren’t afraid to ask for advice.

I currently have about 20% of my wealth in real estate spread around the country.  I own three stocks, Berkshire Hathaway, Health Care REIT, and Magellon Midstream Partners.  My business has had its ups and downs, but has generally produced decent income.  I have a large equity indexed life insurance policy.  I bought a home in 2000.  And I talk to people all over the US about investing.

Along the way I have started a family, seen my wealth grow, and matured in ways I never thought possible.  It all started with a decision to look to successful people for my clues on finance, instead of looking toward the financial services industry.  Ironically, I now derive some of my income from this same financial service industry.  I have certainly made mistakes along the way.  But it has been a great trip so far!

Consider this a plea for folks to really look at who they get their advice from.  Want investing advice, look to people who have made billions doing it like Warren Buffett.  Not necessarily what they quip to reporters, but what they actually have done.

Good Luck on the trail of life!

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