Agnostic Investing – Only for the Controversial (And Crazy)

by FI Fighter on June 2, 2018

in Thoughts

One thing that I’ve learned as an early FI blogger through the years is this — If you want to be liked (and popular), keep churning out and regurgitating the same content that is universally accepted and liked by the masses. Deviate from the road most travelled, and well, you’re going to have your fair share of critics… and doubters.

As my friend just shared with me earlier today…. Thoughts from his friends…

The main focus and goal on this blog has never been to be popular (or liked)… No, if I wanted to appeal to the masses, I would stop pretty much everything it is I’m doing right now and go straight back to writing monthly income statements about how much I’m CRUSHING life b/c of all the cash flow that I’m generating each and every month!

Hey, I’m not saying there’s anything wrong with that (although deep down I feel like I would help far less people if I did make the switch back to my old ways)… Like I’ve alluded to in recent posts, at the end of the day, early FI is all about cash flow!

But not all cash flow is created equally, and sadly, I think this very important distinction is missed upon by many, many people… especially newbie retail investors who are just starting out in the early FI game…

I mean, straight up — If you’ve never even witnessed a severe market crash before in your investing career, it’s tough to be able to separate the wheat from the chaff…

When you’re investing in an up market (like today) where any geek off the street is making decent gains, well, shit, everyone feels like a G and thinks they are hot shit… That’s just human nature and reality… Something I don’t agree with, but have learned to accept.

For myself?

I’m a low key and simple guy… I attribute pretty much all my success to market timing and being at the right place at the right time… No, I don’t think for a second that I’m anything special… But more important than what I think about myself, I try my best to be open and honest with my own assessments of individual performance… When I look back (with the benefit of hindsight), and I see how I was able to succeed in my investing career, I have to be real enough with myself (and to all my loyal readers) to account for all the details…

This means really deep diving into things and trying to figure out OBJECTIVELY just what exactly works and doesn’t work… and not being ashamed or embarrassed to reverse opinions in the process… if it’s necessary.

Even more than that, I’ve spoken to hundreds (if not thousands) of investors over the years, had a lot of mentors, and really, I just try my best to be a student of the game…

What really fascinates me, then, is that when I put all the pieces together, and have many “aha moments”/epiphanies, I’m somewhat flabbergasted to learn that the methods, techniques, actions, etc. that have led to the best results for so many folks who are now in early FI are seldom really ever talked about freely on the web…

I mean, it almost feels like — “Alright, this is the stuff that really works for early FI, but yeah, keep it on the down low… Don’t let the masses know… It’s too unconventional and controversial…

Well, that would be a damn shame…

So, I try my best to lay it all out there…

Obviously, there’s never gonna be a “one size fits all” approach to early FI, but I mean, at the end of the day, again, it all comes down to monthly cash flow, so it’s not exactly rocket science either…

I think a lot of the cognitive dissonance kicks in b/c people like to have these fairytale-like beliefs about their favorite investments… I mean, look around you…

  • Have you ever met an index fund investor who swears by this particular approach and thinks everything else (and everyone else) who tries a different investing method is a fucking idiot?
  • How about those diehard dividend investors?
  • And those hardcore real estate investors who are leveraging themselves to the max rambling on about how cash flow is way better (the ONLY way to early FI) than massive price appreciation?
  • Etc.
  • Etc.

I’m sure we all have… I certainly have…

And I almost have to chuckle sometimes… Having to accept the harsh reality that there are so many brilliant people out there who are so damn passionate and opinionated about any particular asset class that they have to feel the strong need to shit on everyone else out there who even dares attempt anything different than what they are doing… Like there’s this early FI doctrine that we all must strictly adhere to… 24/7, non-stop.

As for myself?

I’m a big fan of opportunity… and because the markets are dynamic and ever-changing, those opportunities come and go all the time… There’s always another train arriving at the station and I just wanna get on some lucrative ones early on before the herd rushes in…

I don’t care if the gems are found in: real estate, emerging markets, large caps, blockchain, commodities, etc…

Hell, it don’t even matter to me if the asset class is offering deep value or hyper-growth potential… It’s all good, either way…

Yeah, I’m NOT surprised I’m controversial… because I shit on EVERY asset class EQUALLY without hesitation!

I used to love buying Class A real estate, and now I don’t b/c the prices have more than doubled… in some instances, tripled from my time of initial entry…

How can I possibly NOT be a hater!?! I don’t like (enjoy) buying assets at record-high prices/valuations!!

Buy low and sell high.

That’s fucking Investing 101…

I used to love index funds and was dollar cost averaging (DCA) into those every single paycheck during my working days… Index funds are awesome, but after going on a 9 year equities bull run, wtf am I suppose to do? Drink the kool aid and believe that the good times will last forever and that a market crash will never ever occur again in the future?

I’m not gonna do that…

Next, before I realized I was duped by getting into out of state turnkey properties, I used to love chasing after that “always appealing” cash flow… Over the years, the evidence overwhelmingly led to the conclusion that my decision to invest in turnkey rental properties was a major mistake (train wreck)… But instead of exiting out of the infirmary just grateful to be alive, I’m now eager to get on the rooftops (someday soon, hopefully after the dust is settled) so that I can yell at the top of my lungs… the truth… letting other people know what an extremely terrible decision I made to attempt out of state real estate investing. Not surprisingly, my least controversial investing decisions were actually my worst ones to date!

Yeah, you get the idea…

Further, whereas these people at least have sworn allegiance to something, I’m a perpetual loose cannon who has loyalty to no asset class… That type of approach, is really only gonna resonate with a select handful of people out there, seriously…

It’s called Agnostic Investing

I hope it will catch on over the years b/c it’s some extremely powerful stuff that can do wonders in shortcutting people’s journey to early FI…

But it probably won’t…

Because it takes an extremely open mind and the willingness to commit and invest thousands (if not tens of thousands) of hours into rigorous study… constant learning… to EACH asset class! After you’ve put in your few thousands of hours into learning one asset class, you gotta lather, rinse, repeat all over again to gain basic competency in the next asset class!

Who has the time, interest, desire to do that?

Not everyone, of course…

That much is readily apparent…

And you gotta have that discipline to never fall in love with an investment/asset class!

Sounds easy enough to do, but there’s probably a good reason why almost nobody can do it…

You ever find it funny that the people who shit on mining stocks all day and night long have never even owned a single mining share? And the fact they can’t even hold down a basic conversation b/c they really don’t know jack about the sector?

Well, then why are these people talking and incessantly spitting out nonsense?

People got ego, pride, and they like to be right… and heard.

No doubt about that.

I say — Check your ego at the door. Think of each asset class as a tool in your toolbox, available to you at your disposal… It’s not always gonna be the right time to bust out a sledgehammer, and sometimes you might need something that offers a bit more grace, like a fine blade, but hey, you never know right? And if that Zombie Apocalypse ever comes, you’re gonna want to have that trusty shotgun ready to go!

In the next post, I’ll try and tie everything together… Link up how Agnostic Investing goes hand-in-hand with long-term foundational assets (i.e. Buy and Hold Forever assets, everyone’s favorite).

Again, ample cash flow is the name of the game (end game) of early FI…

And that’s precisely the place we are all trying to get to!

Sometimes that road is traversable, and you can take a straight shot there…

On many occasions, getting off the beaten path can be even more rewarding!

 

I truly believe you need an open mind for early FI… because it’s not easy at all.

 

If you manage to get there while defying everyone else along the way, more power to you, I guess…

 

But instead of being a total douchebag (there are plenty enough of those in this world), I think if you’re able to get to early FI, there’s nothing more AWESOME than taking the time out to reflect… being open and honest with your own assessment on how you got there… so that you can share any insights that you picked up along the way… and help even more people try and get to early FI!

 

No guarantees of course, but knowledge is power.

 

B/c you just never know when those zombies will strike…

 

Fight On!

{ 10 comments… read them below or add one }

1 PonNo Gravatar June 2, 2018 at 6:12 pm

Gotta believe bro! Ignore the surrounding haters, focus on the investment!

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2 FI FighterNo Gravatar June 3, 2018 at 11:09 am

Thanks Pon! Will do my best! 🙂

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3 BowmanNo Gravatar June 3, 2018 at 7:44 am

Great post again FIFighter! Thumbs up, keep up the good work!

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4 FI FighterNo Gravatar June 3, 2018 at 11:09 am

Thanks Bowman! Will keep on keeping on!

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5 Midwestern LandlordNo Gravatar June 3, 2018 at 8:05 am

If the “haters” are not FI yet, then they really have no credibility. At least become FI before you start judging people that are already FI. Many times popularity is one inch deep and a mile wide. There is no substance just accolades and platitudes. I prefer substance. From a reader perspective, I liked seeing property cash flow updates because I found them interesting. While purchasing more Class A investment properties at the moment is not a good option due to price point (at least in the Bay Area), ongoing management / performance of existing rental properties is important IMO. It sounds like the Bay Area rentals have continued to work out well and there have been challenges on the Turn Key investing front.

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6 FI FighterNo Gravatar June 3, 2018 at 9:46 am

Midwestern Landlord,

Thank you for the comments and continued support!

Yes, I used to enjoy very much writing those cash flow reports as well, but it got to a point where I think I was doing more bad than good b/c it’s very easy for someone to fixate on those numbers and assume too much…

Case in point, my turnkey rentals used to produce numbers on paper that looked significantly better than my Bay Area rentals… but as always, the devil is in the details… Over the years, my Bay Area rentals have appreciated significantly in both property value and rent increases… The turnkey stuff has not, at all in both categories… This is something that is extremely important and something newbies never think about… Over the years, rental property MUST create a larger profit margin for you or you will ultimately lose the game due to deferred maintenance/repairs adding up over the years… Not to mention, rising: property taxes, insurance premiums, labor costs, HOA dues, etc. etc.

This is why I believe adamantly now that turnkey real estate investing is a dead end… You can’t win… Unless you have local expertise and systems in place, boots on the ground, that profit margin doesn’t rise fast enough to make it worthwhile… The caveat, imho, is if you’re going to do out of state investing, you need to 1) not use a turnkey provider (the upfront premium you pay is too great) 2) self-manage. In order to self-manage, you almost certainly need to invest in Class B/borderline Class A regions (where the turnkey operators are NOT)… Class C, I am not convinced it can work for an out of state investor b/c those locations/tenant base usually demand a lot more attention. Further, the lack of property/rent appreciation via Class C will make it an uphill battle over the years for what I call “slow trickle cash flow” to be able to again offset any major expenses. One major expense, and you can kiss goodbye an entire year (or more) of slow trickle cash flow… Stocks can’t go below zero, real estate can!!! Especially low quality rental properties that require a lot of continued attention and maintenance (i.e. $$$$$). I’ve witnessed first-hand some peers who have forked over $100k plus in repair bills just to get their Class C junkers back to rent-ready status… If that’s not a money pit (liability NOT asset!) that is making you poorer, I don’t know what is… $100k repairs bills on a $50k property is financial suicide! $100k repair bills on a home that you bought for $300k that is now worth $1 million is very worthwhile to do! Worst case, you burn out from repair work and landlording and you have an exit strategy to sell at a HUGE profit! Exit strategy is also so important and something that isn’t considered by newbies… If you have a $100k repair bill on a home that is worth $50k, game over, you lose!

The above were my “aha moments” on the true drawbacks, limitations, and failures of out of state turnkey investing. Granted, I have way more to say from my own experiences and some horrifying numbers to share with readers.

All in due time.

But I again am adamant when I speak from personal experience (and many others have shared with me as well) — Turnkey Investing is a path to mediocrity (at best) and can lead to financial ruin (at worst).

I’ve seen it happen… and it frustrates me to no end (which is why I might seem so pissed off in many of my posts) why more and more ppl with these terrible experiences aren’t coming out and sharing the TRUTH.

In contrast, the Bay Area properties have been the key to my early FI and the main reason why I haven’t been forced back to work… The turnkey properties almost made me want to run back to my old day job.

Eventually, the truth will get out there… whether from me, or other people. All this bs that has been propagated out there will be called out… it has to.

All the best!

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7 Dirty HarryNo Gravatar June 3, 2018 at 4:02 pm

I have LOVED the last series of articles since your return! HUGE thanks for not being politically correct in your writing and also not just echoing the same message as every other early FI blogger. My biggest concern and doubt right now is how long the current investment options landscape will continue to look like it does. Every major conventional asset class looks like a massive trap long term (stock funds, buying A/B real estate in this historic sellers market).

I am 27 with zero debt, single, 80k/yr job with 90K in 401K in money market (CASH) and 90K in CASH. My biggest fear is that this bull market just hums along for another few years. I am so anxious to get fully invested and start my FI journey with a bang but no assets seem to be on my side like they were in 08 when you got started. I dont quite have the confidence to just dump 100K into silver miners etc……Just feeling paralyzed right now on what direction to go. I wanted to tell my situation because I feel many readers could be in my same spot.

Thanks!!

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8 FI FighterNo Gravatar June 3, 2018 at 10:27 pm

Dirty Harry,

Thanks for the support, and I will keep this comment in mind for future posts.

I definitely need to never lose sight of others out there who are working hard towards early FI, especially those doing so in a very challenging investing environment.

The buying opportunities today cannot compare to when I was buying in 2012, 2013, so I would be doing everyone a huge disservice trying to act like the playing field is the same. It’s not… It’s way harder today.

But when there’s a will, there’s a way! I think being diversified is always a good idea, and actively researching into emerging sectors that you think will boom over the next decade. A small gamble that hits big can still provide a tremendous boost to getting to early FI.

All the best!

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9 georgehpuckNo Gravatar June 3, 2018 at 10:22 pm

I have read all of your posts thru the years. and I really like the depth of your insight and rigor into research.

I will say the one place I disagree with you is the risk you have taken on by not being diversified. Yes you have hit on the mining stocks, but over time a lack of diversification I think will harm more than will be helped.

I do generally agree with your sentiment with most turnkey providers. There are a couple in Memphis and Dallas who I think are honest, but end of the day buying from a turnkey company is buying at or above retail and while hoping that there will be reasonable cash flow. Its tough for me to see how that can be an advantage over buying a REIT or just investing in the stock market.

I do think that someone who is buying real estate needs to model their properties with a property manager. That way even if you do your own management sometime in the future you can hire a property manager.

I think reading thru cash flow is still interesting, and I think its still possible (although getting harder) to find properties, and history tells you that a consistent investment philosophy in the stock market is productive, regardless of the timing.

I get the interest in swinging for the fences, and it has served you well, but I think over time it is a good idea to stay at least a little diversified.

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10 FI FighterNo Gravatar June 3, 2018 at 10:31 pm

George,

Sorry if I haven’t been clear in recent months, but I did sell down a large chunk of mining stocks… Someone wise told me that “diversification is the key to preserving wealth.” I am definitely trying to follow this advice.

I don’t need to swing for the fences anymore… Mining stocks were a risky bet, but I was comfortable making a concentrated bet back in late 2015/early 2016 b/c the valuations were so depressed. I made over $1 million in mining stocks, so I got more than I bargained for when I first gambled…

Right now, I still hold my Bay Area rentals for cash flow, and they are Buy and Hold Forever investments… Slowly paying down the mortgage each month thanks to my tenants and collecting cash flow to sustain early FI.

Outside of that, I own physical precious metals, a lot less mining stocks, a lot of cash, and a dash of cryptos (just for that long shot home run play)… Nothing too crazy or fancy. I honestly feel like my best investments will come later, and I’m patient enough to wait for buying opportunities.

My situation is not applicable to those striving for early FI, so I won’t focus too much on these details… I am entering a more “boring” phase, which I will still discuss, but the focus on this blog will still gravitate towards those trying to get to early FI.

Getting to a few million in net worth is not easy for most people… but once you are there, you don’t need to gamble… You can diversify and I agree with you, REITs and index funds are a great way to go long-term. Set it and forget it.

Cheers!

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