As an answer to someone who asked me why I do not go back to work on IT in order to have two sources of income I replied something like the following …
It comes down to this: time is a limited asset.
I think that in practical terms it’s extremely difficult to work in a fixed job and invest well simultaneously. To have good results investing on long periods of time you need to be fully focused on it. When I worked my results were very mediocre or worse than that because I had no time to learn and practice investing. Investing takes too much time to do it well. It’s a huge advantage to dedicate, whenever you like, 60 hours a week to it.
A benefit of working is when you have small amounts of money saved. Then working gives a lot of income in proportion to your savings. For example if you have 50K saved and have a 50K per year job then you make a lot with your work in relation to your savings.
But if you live with low costs or have one million saved then making 10% average a year on the stock market beats most works. So it all depends on how much money you have and how much you need to maintain yourself.
My problem with working is mainly that:
1) I mostly disliked working for clients or bosses. Even as an independent or with my own company.
2) Working took time away to find out what I really liked.
3) Once I had an idea of what I liked working took most of the time I had to concentrate on learning and getting better at it.
As I see it very few people with jobs do well investing on stocks. They basically lose their hard earned money on the market. Others save their whole life and when they start investing they are old and unprepared risking their life savings due to that.
I was not one of the few lucky ones that knew soon what he liked. If you are fortunate to know it, whatever it is, then it’s a sin not to be doing it already. And working for money on something you do not like takes a toll on you, if you value yourself and your time you should really ask yourself if it’s worth it. Think about what Warren Buffett said:
If you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don’t have to do anything I don’t want to do.
The ideal with investing or any job you really like is to start as soon as possible, seriously, full time and most importantly: really loving it. It’s hard to compete with someone who does what he loves. Keeping pace with someone passionate about his job is tough. Loving your professions will make you advance fast and do it the best you can. Chances are high that you become an expert at it. The sooner you start what you like the better for your well being, health, and happiness.
Cheers!
jrv
Bravo!
Jrv, so you feel happier now than the old days in IT biz?
How would you manage the risk in case of a market crash like 2008-09?
I could image if one’s entire income depends on the investment gains, the fear of a bad year could put quite some stress on his mind.
Personally I could not get over with that … maybe for the lack of confidence.
But I agree with what you said – do what you love!
Bad years will come, for sure. I try to manage it by being in solid companies, not using leverage and by holding cash on the side to deploy in such opportunities.
I definitely feel happier since I’m only investing. The IT job was OK. But I enjoy life more now because I like what I do more.
Worse case if I lose it all I can always get another job. At this moment I am making silver jewelry as a hobby. I could sell it and do that seriously if I needed to. It would be a nice job, better than others I’ve done.
Cheers!
jrv
JRV, you work alone from home, right?
Me too albeit I work for a company.
After years in such state, how do you feel and deal with the “loneliness” ?
Hi Kai,
I didn’t know you worked from home ! My problem is mainly dealing with the kids (I have 3 very young ones). I’ve managed it by developing a concentration that lets me shut down all type external noises, specially the ones coming from kids. But most of all I am very fortunate that I have a wife that loves to take care of domestic tasks and lets me work quietly, I could not be more grateful for that.
Cheers!
jrv
Hi JRV,
I found you when I was researching on VXX and since then I read everything you write here. We have similar backgrounds and we have come to the same conclusions. Yes, if you work it is very difficult to succeed in investing. I know at least 20 examples of failure versus one guy who is a doctor and became a successful investor (Michael Burry) by the way these two words in this post will probably bring you a lot of traffic.
I know a few people who left their jobs, just like you and became very successful in investing. An when I say investing I am absolutely aware of the meaning of the word and I don’t confuse it with speculation.
Keep up with the good work.
Cheers,
Georgi
Hi Georgi,
I recall you are a software developer and were shorting leap Cisco leap puts when it approached 16. You’re since then in my Google+ investor’s circle. Glad and flattered to have you as a reader thanks !
I’ve read about Michael Burry’s life and his relatively recent UCLA speech. It is is very interesting. His results are amazing and he is very flexible in the way he makes money, his sub-prime shorts prove it.
Before he quit being a doctor he fell asleep during a surgery because of too much focus on investments. It shows how difficult it is to have two jobs.
I’ve read Liars Poker from Michael Lewis, it was an excellent book. I have yet to read The Big Short, where he talks about Burry.
Burry shut his very successful hedge fund and is now managing his own money. He will not earn commissions for managing other people’s money anymore but now he has the advantage that no one will be putting any pressure on him anymore. He’s in a very comfortable position
.
Cheers and best wishes !
jrv
http://www.youtube.com/watch?v=1CLhqjOzoyE
Dr. Michael J. Burry at UCLA Economics Commencement 2012
Thanks Kai, that’s the one I saw, indeed a very interesting speech.
Interesting topic. I work full time (engineering) and invest on the side. I am doing decent with my investments and mostly beat the market. I could do better with full time investing but not that much better, I think. The pressure of being dependent on investment income might just destroy any advantage i might gan by spending more time on investments.
Perhaps even more importantly, observing life from the inside in the corporate world has given my insight, how management thinks, makes decisions and a corporation works. I think this has made a different and more cynical investor than I would be, if I would just do investing full time.
Hi Feurerball,
Indeed only a minority invests full time well, even most professionals are said to under-perform the market.
I have a friend who worked as a stock analyst and quit his job to fully invest and lost most of his money fast, he actually did much worse than when he was working. He got nervous and emotional under pressure and had more time to make bad decisions, he accelerated his losses
. To make the story short: he lost his money fast.
So if you know yourself it might be wise to keep doing as you do. Specially if you are doing so fine.
Another option that guarantees to do as well as the market is to buy market index funds. Some guys just buy a couple of hundreds on them every month and have no worries nor need to dedicate their little free time to it. Here is Warren Buffett’s advice to people who want to do well without any effort:
Cheers!
jrv
Geez, I just found out this post and love reading it.
Once I read that what’s really difficult for most investors are the first 100k (first 100k are a bitch, sorry but that was the title), that makes sense, 10% over 100k = 10k, actually if you make 2% one day that’s 2k of unrealized gains, of course it works the opposite way.
Take care, keep on writting.
Cesc
Hell Jrv,
I am a new reader of your blog. I also want to retire in a few years. I have $105,000 invested. Well, 49k cash and the rest is invested.
I have one question. You might feel that it is too personal to answer on the blog – in which case you can send an email. How much money do you have invested now? I would like to make a calculation myself as to when to retire. Your figures might help me get to a target.
Thanks for the blg. It is a very enlightenng read.