Maintain Control — Worth it’s weight in gold
You’ve likely heard, how important in business it is, to maintain control of your company, generally more than a 50% voting rights. This is so you control your destiny, what happens to yourself and your life.
Control is just as important in investing as it is in business, and way too many people give up control over their investments. Here is why it’s important to retain control, and later, why it’s so bad to lose control.
When you invest into anything, have a clear understanding of what you’re expecting to achieve. How long do you want to hold it for? What are you looking to get out of it? Why are you investing in it? What will you do with it if the market goes up or down? Ideally, each time you have an investment, you should reflect on this, write it down and then later on reflect when you get raid of it, what happen, and were your assumptions right or wrong? Doing this will help you continually improve your ability to invest better in the future.
We would much rather buy individual stock securities than mutual funds, because we retain more control over what happens. Later I’ll write about, why we think mutual funds are a poor investment, this will be one of many future reasons.
One of the reasons mutual fund suck, if you’re trying to get rich, is the fact that, the fund managers can buy and sell securities within their fund at any time. Every time they do, it causes a taxable event for you. You may or may not want the taxable event. Generally, we don’t want random taxable events. We want to be able to control exactly when we have a taxable event. We don’t want to leave it up to a 3rd party who can at any time trigger taxable events for us.
We generally time our sales when we do other investments. We try to have deductions lined up in advance, before we sell, to offset any gains. For example…We commonly do this in real estate, by exchanging our stock gains, into real estate, which when we buy, we get new depreciation schedules and can use that to offset the gains. If fund managers were just buying and selling stocks whenever in their funds, we’d never be able to time our other buys right. We’d just be paying taxes whenever fund managers buy and sell, and a lot of them, like doing that because they may more money on fees.
This is also why when we invest into real estate, we don’t buy any condos or townhomes. We don’t want to be tied up with any HOAs. Last thing we want is to lose control of our investment, and have another person run it. They may mismanage the HOA. They may spend money we think is unnecessary. Some maintenance item could be deferred that we wished to do it. There are extra politics, dealing with the committee. Most of them aren’t on the path to becoming rich, so we wouldn't’ want them handling our investments. There is also the problem, that some HOAs setup where only a certain percentage of units can be rentals. If that percentage was reached, then suddenly we’d possibly lose control over renting out one of our condos. If the HOA and the building has issues, banks may not to loan against the building. This makes it even harder to sell out. Overall, we absolutely don’t want this. We don’t want to lose control over our real estate investment to some HOA committee.
We want to control our assets. We want to control both the building and the land. If the building falls down, at least we own the land (in the US), and not some percentage share of it. We want to be able to dictate, when and where we spend our money. We want to be able to do what we want to do with our property, and rent it out to whomever, without leaving it subject to an HOA committee to make decisions. Tear it down and rebuild if we want. We don’t want to have to sit and discussion with others what we can and can not do. We want to be able to make our own decisions, and run with our life and our business. This isn’t just good for business and investment sake, it’s a better way to have control over your life.
Lastly, in general, you want to have control over your assets. If you don’t know what you’re doing, you’re likely going to have someone else doing it for you, and they may or may not be doing a good job. If you want to be rich, you really have to want it, learn how, and learn how to manage money. Most other people helping you, or managing your money aren’t rich, they may make less and earn less than you, and how can you really expect them to help you do something they don’t do in their own life. Be careful who you accept advice from, and maintain control over your assets and your life.
