JF2480: Simplifying Investing in 4 Steps | Actively Passive Investing Show
Today we’re covering how to make investing simple in just 4 steps, with Theo Hicks and Travis Watts. Theo and Travis talk about the real reasons why you’re not meeting your goals, and how to overcome the “analysis paralysis.” They break down the step-by-step process to help you move the needle forward and take action.
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Theo Hicks: Hello Best Ever listeners and welcome back to another episode of the Actively Passive Investing Show. As always, I’m Theo Hicks, with Travis Watts. Travis, how are you doing today?
Travis Watts: Hey Theo, I’m great, man.
Theo Hicks: Today, we are going to talk about how to make investing simple.” We’re going to go over four steps to make investing simple. As always, Travis is going to break down why we are talking about this topic today.
Travis Watts: Sure. Lots of people, myself included at one time, can easily get caught up in analysis paralysis. I talk about that all the time and I see it every week, working in investor relations. This is just basically, to the point of the title, to make things simple for you the investor. Investing can be complicated, but it can also be simple. The saying or the phrase I like to use all the time is “simple, but not easy.” That’s how I see investing in general. That’s my overarching philosophy on it. We’re going to cover four simple steps, just to make it as simple and clear as possible; just a framework that you can kind of plug in to how you approach investing… No matter what you’re investing in, by the way; of course, we talk all the time about multifamily real estate on the show. But hey, this could be applied to literally anything, even stocks. With that, I guess I’ll dive into one and two, and then I’ll turn it over to you for steps three and four and kind of do a recap at the end. Are you ready to get going?
Theo Hicks: Let’s go.
Travis Watts: Alright, cool. Step number one is to identify your goal. I know that sounds simple, but it’s not always easy. Do you really know what your goal or what your goals are? In other words, can you clearly articulate them to somebody else? Are they measurable, by the way? Let me give an example; things I hear all the time when I ask people about their goals every week. I hear very simple phrases like, “Well, I just want to generate some more passive income.” “I just want to build some wealth.” “I just want to retire one day.” These kinds of things. Well, I’d say those are bad goals, because a better approach to that would be something like “I want to make 11,000 dollars per month in passive income over the next five years by investing in multifamily, cash-flowing real estate, so that I can replace my W2 job and income and I can work from home. I can spend more time with my family and less time in traffic and out on the road, traveling.” That’s a much better and detailed goal.
That’s what I mean by can you articulate it to others? Is it measurable? We’ve got a timeframe in there, we have multiple why’s, we really understand what’s going on and what the mission is. Bottom line – this is typically what happens when you don’t get that clear on your goals and you just say, “Yeah, I want to build some wealth.” “Yeah, I want to make some money”, is you’re going to run into a roadblock, inevitably; there’s going to be a setback, there’s going to be a hurdle, there’s going to be a market correction, there’s going to be something that happens. If your “why” isn’t strong enough and your vision isn’t clear enough, you’re just going to drop it and say, “Well, yeah, I was doing that investing thing. But yeah, it didn’t work out. So I’m going to go do this over here.” It’s the only way to stay true and make it all the way through your mission. That’s number one, identify your goal and or your goals.
Step number two is to identify your investment criteria. This is something I teach when I do seminars, or when I speak to real estate meetup groups across the US, usually virtually in the past year… But I’m always talking about knowing your investment criteria. I’ll give you some examples. Again, it starts with your goal and then you kind of reverse-engineer. You say okay, “My goal is that 11,000 dollars per month, and maybe I need cash flowing stabilized assets that distribute on a monthly basis, blah, blah, blah. I like these particular states, these particular markets, these particular asset types, I like B and C class value-add types of business plans.” This is all criteria that I’m spitting out a bunch of jargon. You need to get clear on what that is for you and how that helps you achieve your goals. Again, the danger of not knowing your investment criteria, what I see most commonly is that people get caught up in the analysis by paralysis.
That happens all the time, because there are literally hundreds of thousands of different investments that you could be partaking in. That gets very complicated and very exhausting when you don’t know what you’re looking at, you don’t know what you’re doing, you don’t really have a why figured out. You’re saying, “Well, should I go invest and crypto? Oh, no, no, the stock market just dipped. I should be there. No, no, there’s a real estate deal that just popped up.” You’re going to burn yourself out mentally trying to go through that process. I promise you, I’m not telling you guys this just because I read it in a book. This is what I did from 2009 to 2015 when I started my journey in real estate. I had ADD, I was everywhere. I’m going to flip a house; okay, that was fun. I’m going to do a vacation rental, okay. Now I’m going to rent spare bedrooms out. Now I’m going to do some buying holds. It was chaotic, it was very exhausting, and at 100% led to burnout. It took me about five, six years, but I was done.
Again, take that goal that I mentioned a few minutes ago. If your goal is 11,000 dollars a month passive income, well, then knowing your criteria would look something like this. Should I invest in bonds? Well, let’s see. They only pay out twice per year, so that doesn’t meet my monthly income goal. They pay 2% a year, so that’s not going to get me where I need to go for 11,000 dollars a month, unless I had millions and millions and millions of dollars to go put to work. Maybe you do, and maybe you don’t. But this is what you’re trying to decipher. So instead of doing the bonds, maybe you’d say, “Well, maybe I should look at some cash-flowing real estate that distributes every single month where I can get a higher yield on my investment.” Something like that. Everybody’s different, but you’ve got to take the time to educate yourself a little bit, write down your criteria, and how that helps match up to your goals, which is number one.
Theo Hicks: I appreciate you breaking that down. Going back to the first one about identifying the goal. You mentioned how, when the going gets tough, having that very clear goal of why you’re doing what you’re doing will kind of help you push through that and continue working forward. But you kind of mentioned this as well, it’ll help you avoid that ADD you’re talking about. I like how you broke it down. It’s kind of like a decision tree or a flowchart. You’ve got your goal and you say, “Okay, I want to make monthly passive income.” It’s like a process of elimination so “Yes, I want to do this. What are my options? What are the types of things I could invest in?” Then certain things will automatically be eliminated, because they don’t pay out monthly, or they’re not passive, or to take a lot of time to do because your goal simply does not work.
You can kind of narrow down the scope of the types of things that you can invest in that could even help you to those goals in the first place. That is one way to simplify a lot, because based off of my conversation with investors, the two big roadblocks or big obstacles people face is the shiny object syndrome that you’ve talked about. They’re just essentially taking way too much action and they’re just flailing around and doing too much. Or, the flip side, which is the analysis by paralysis, which means they’re not really doing anything at all. I’m talking about step four, how to get over that analysis by paralysis, but I think those first two steps will definitely help you not fall into that shiny object syndrome. You’re really going to fall into one of those two camps when you’re first starting out.
Again, number one was to identify our goal. Number two is to identify your investment criteria. Step three is going to be educating yourself and then finding a mentor. After you know what you’re going to invest into. obviously, you need to do some level of education, depending on where you’re at, to identify your investment criteria and what to actually invest in. But the education in step three is a lot more detailed, a deep dive on that specific thing that you’re going to invest in. Find a book, a podcast, conferences, seminars that focus specifically on whatever it is you’re investing in. Let’s just take multifamily, for example – attend multifamily conferences or seminars, buy the Best Ever Syndication book, other books on investing in multifamily. Then you’ll also want to find an actual person to be your mentor. Books are great, but there’s really no back and forth. You can’t ask a book a question that answers it for you. You can learn from someone else’s mistakes in the book, but what about things that aren’t put in the book? You can only put so much information down on paper. You can get a lot more out of a person who is actually doing it.
We’re actually going to do an episode that releases next week that focuses on the good and the bad of a mentor. Make sure you check that out for more details on what to look for when you’re finding a mentor. We’ve talked about this before, the importance of education and mentor is ultimately, you’re trying to avoid simple mistakes that other people have already made. You read the book, you go to the conferences, you get educated, you have your mentor, you figure out some of the simple mistakes that were made that could easily have been avoided. They tell you what they did, how it happened, what not to do, and then you don’t do that. You don’t have to learn on your own dime, in a sense. That’s one of the reasons why we host this podcast, why we write the books, and host the conferences. In the conferences, for example, we bring in tens of speakers who have really big businesses, are already really successful, but in order to get to that point, they’ve made a bunch of mistakes; sometimes really, really big mistakes.
I remember a few years ago, there was someone there who made a multi-million-dollar mistake and he lost tens of millions of dollars. We have people who’ve lost all their money but built it back up again, and they explain “Here’s what I did wrong.” You can do step one, you can identify your goal, you can identify your investment criteria, and then if you skip step threea and you don’t educate yourself and find a mentor and just start taking action, then you’re going to run into a lot more problems. It might end up working out perfectly fine, but the probability of making mistakes is much higher. Bottom line, get a mentor, educate yourself before you go out there and start taking action, which is step number four.
Now this is where we get into the analysis by paralysis, because how much education do you need before you actually go out there and take action? I was just looking at some of the best-performing podcasts on this show, and one of them, their Best Ever advice was about how to avoid analysis by paralysis. They said, “Look, you’re never going to have all of the information that you need in order to make the perfect investment decision.”
No matter what you’re doing, there’s something there’s always going to be unknowns. They said, “It’s better to take action on partial information than to just do nothing when it relates to getting closer to your goal.” Going back to what Travis talked about, if your goal is to make 11,000 dollars per month in passive income, but you’re not going to make an investment decision until you know every single thing about this deal, this operator, this market, then you’re never got to take any action, because you’re never going to know everything about that person, you’re never going to know everything about that market, you’re never going to know everything about the deal. And even if you did, something could change tomorrow that makes all the information not accurate. Just understanding how to properly vet a deal, how to properly vet a sponsor, how to properly vet a market, having enough information that you yourself are confident in your decision, that is when you go out there and start taking action. Don’t fall into that trap of thinking you need to know everything before you go and take action, because then you won’t take action at all.
I’ve got a quote here that I like from Harvey Mackey, “Ideas without action are worthless.” You can spend all that time creating your goal, setting investment criteria, having a mentor, educating yourself, and then have all that information in your head, but if you don’t actually do anything, then it’s not really worth anything, because it’s not helping you get closer to your goal and to actually go out there and do something. Again, on the one end, you’ve got the ADD kind of shiny object syndrome, taking too much action. On the other end of the spectrum, you’ve got the not taking any action at all. You want to find that happy medium and make things simple. I think that what we’ve talked about today can definitely help you, again, if you have the shiny object syndrome, push you closer to being more focused, and if you’re not doing anything, push you towards taking more action.
Travis Watts: 100%. In regard to our theme today of making things simple, we’ll cut this episode short just to make it right to the point. I just want to add this as a side note to what you’re talking about. If you’re the kind of person that really needs some help on taking action and just making it happen, there’s a great book called Can’t Hurt Me by David Goggins, an ex-navy seal. This guy’s story is incredible, just going through navy seal buds training three times, then later going on to be an army ranger, and go into the delta force training… Just crazy, crazy stuff, but anyway, I just finished reading that book a couple of weeks ago. That’s a book I wish I had read way back when, just to give me a little perspective on what people are capable of in terms of taking action. I know I’ve shared this story before, but this is a great point to insert that one more time… In 2015, I set a goal to read a book a week, so 52 books over the course of the year. I did that, however, I see that mostly as a mistake, because I wasn’t taking action.
I had my head buried in books for an entire 12 months, actually a little bit more than that… There were deals that passed me by left and right; there were some great deals I later followed up on that I could have participated in that did incredible. But I was too busy reading, because I had just set this goal that I was going to do it. So you’ve got to have a little balance; what I wish I would have done is maybe read two books in January or February or something, then taking a little bit of action, done a deal, got my feet wet, so to speak, and then read a couple more books, and then take a little more action, finding that balance.
The last thing, to everybody listening, if you haven’t already, here are the four steps again in recap. Write them down, retain them to memory; these are gold, these are absolute gold. One is to identify your goal. Two is to identify your investment criteria. Number three is educating yourself and find a mentor. And number four is to take action. That’s all I’ve got.
Theo Hicks: Perfect. I want to add one more thing that I just thought of at the very end. Another Syndication School episode that we did actually on a company, Spartan Investing, who made the Inc 5000 list [unintelligible [00:17:38].01] One of the speakers at the conference, he was going over some of the tips of how to become one of the fastest-growing companies…And he talks about essentially we’re talking about now. You set a goal that you want to do, you figure out how you’re going to get to that goal, which in a sense is what the investment criteria is, and you go out there and take action. I like how he put a timeframe on all those. It was, identify the goal, figure out how you’re going to get there, educate yourself on how to get there, and then take action. I think it was 30 to 60 days for each of those steps. Take 30 to 60 days to figure out what your objectives are. Keep in mind, this is a company not just setting one goal, so you have to cut that time down.
For each of those goals, spend 30 to 60 days educating yourself on how to achieve that goal. Then 30 days setting up a step-by-step process of how you’re going to achieve that goal with different objectives, timelines, and things like that. And then go out there and just start doing it.
I think, again, if you’re having that analysis by paralysis problem, by setting a timeline for yourself saying, “Okay, I’m going to gather as much data as I can in 30 days and then I’m going to go out there and I’m going to start doing it.” It can be very helpful as well. If you don’t have anything else, Travis, we’ll end there. Everyone, thanks for tuning in. If you have any questions that you would like us to answer on this show or in our shorter-form 60-second question segment, you can email that to me at firstname.lastname@example.org. Thanks for tuning in. Have a Best Ever day and we’ll talk to you tomorrow.
Travis Watts: Thanks, Theo. Thanks, everybody.
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