Where do you go for investment advice?

A financial advisor? CPA? Jim Cramer? Suze Orman? Maybe the retired guy down at the pool?

What about Yoda? Ever consider him?

As surprising it may sound, when it comes to getting good advice on investing, for a moment, forget The Wall Street Journal and everything else out there. That two-foot, nine-hundred year old creature surprisingly offers some decent advice on investing. In fact, as crazy as it sounds, the entire Star Wars series itself offers some fantastic suggestions to get us on the right path towards success. Only problem is, few people have taken the time to do something as ridiculous as I have: ponder how the classic tale can teach us a few things about making money.

Mind you, this wasn’t exactly done on purpose. A couple of nights ago, in the deep, dark hours of a California night, I found myself out on the couch flicking through channels for something to lull me to sleep. After watching the Met highlights on ESPN (total disappointment), a re-run of Mad Money, then surfing past Happy Days and Charles In Charge, I landed on Star Wars only to soon realize the classic movie and all those that followed really can teach us a few important things about prudent investing.

Here’s a few examples:

Investing: I recently took a moment to do something most normal people would never do: search through a stack of magazines to analyze the financial ads. Between Fortune, Money Magazine, Smart Money, BusinessWeek and a handful of others, the results were undeniably clear: in my brief study, when it came to ads for financial products, by a long-shot, it was the costly, managed mutual funds that advertised far more than anyone else.

What relevance does this have? … Let’s continue …

Star Wars: Imagine being Luke. You just crashed in a dark, musty swamp where a two-foot tall creature named Yoda revealed himself to be the Jedi master. If that wasn’t odd enough, a little while later the thing tells you to start lifting rocks with your mind. Having little choice but to go with it, you heroically manage to satisfy master, but when he tells you to lift an x-wing fighter with your head, that’s a different story:

LUKE:
Master, moving stones around is one thing. This is totally
different.

YODA:
No! No different! Only different in your mind. You must unlearn what you have learned.

Lesson Learned: I totally agree with Yoda. After all, who wouldn’t? The creature not only managed to live nine-hundred years, but he beat the pants off an Evil Emperor four times his size.

When it comes to learning a few things about successful investing, the first place many folks should start is not by learning complicated investment formulas that ultimately few wind up remembering, but with a willingness to do what Luke was basically forced to do: unlearn some of the things you perhaps already know.

What baggage are you reading this article with? Is it scores of ads from costly mutual funds trying to get your hard earned dollars into their pockets? You know, the ads showing happy people who all seem to be putting Bill Gates to shame? Based on the vast number of ads out there from the costly fund companies, chances are your sub-conscience is carrying a few of those fancy advertisements in your head and you may not even know it.

So, to begin with, start by listening to Yoda. Being a successful investor often means willing to unlearn some of what you know. While your mind may not wind up lifting an x-wing fighter from a dark, musty swamp, you just might be able to open a window to a few new interesting concepts about successful investing.

Here’s the first example that comes to mind…

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Investing: Some of the more interesting investment concepts can either be traditional in nature or somewhat unique. Although they’ve been around for ten years or so, a low-cost investment product such as Exchange Traded Funds are relatively new and are just starting to explode with popularity. On the more unique side of the spectrum, who would ever think something as bland, boring and unappealing as Life Insurance would provide some retirees with better returns than their stocks have ever produced? In today’s marketplace, investors selling their life insurance policies are experiencing some of the greatest profits I have ever seen. Who’s doing these things? It’s not sophisticated actuaries nor is it Noble Laureates that have figured out how to beat the system; it’s main street retirees that opened their minds to one of today’s hottest concepts, that of something called “Life Settlements.”

Star Wars: In real time it took a few months but in movie-time it took just under two hours for Luke to truly open his mind to new concepts. By fully opening his mind and entrusting The Force, he turned a targeting computer off and wound up landing one right into the Death Star’s exhaust port. … End result? Death to the Star and birth to inter-galactic celebrations across the universe that changed our movie-going lives forever.

Lesson Learned: Whether it’s the willingness to turn off a computer tracking system or explore innovative concepts such as Life Settlements, it’s those with open, educated minds that often find the success they seek.

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Investing: Who would you rather be? A sock puppet on national TV promising those that own its stock boatloads of money or a cup of coffee that costs 3 bucks? While at first being a puppet seemed like the way to go, it was just a matter of time before Starbucks double-Frapps put the Pets.com mascot to shame. As most people that experienced the .com bust can attest to, investing into hype often leads to nothing but regret.

Star Wars: Who would you rather be? A seven foot master with a deep voice, impressive ship and a mind that melts men or a skinny blue eyed farmhouse kid chugging around the galaxy in a worn out jalopy? While at first glance sporting a cool black helmet and long cape could seem like the way to go, Star Wars proved to us that in the end, staying away from the hype can wind up saving you from the dark side of things.

Lesson Learned: Save the sock puppets for your kid’s next birthday. Flashy ads, slick brochures and fast-talking salesmen isn’t what counts, it’s what’s behind the window-dressing that does. Next time you’re confronted with a hyped-up investment that seems a bit “too good to be true,” keep in mind Han Solo’s classic line, “I got a bad feeling about this.” Think smart, double-check the hype and remember: this is your hard-earned money we’re talking about.

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Investing: Some of the most successful investors I’ve ever met started out with nothing. Thinking back to these people, those with the most often started out with the least. Somehow, some way, fearless persistence, dedication and that occasionally annoying thing called “time” steadily built them their success. While diversifying your investments, reducing fees, minimizing taxes and budgeting yourself to save a few dollars every month may sound painful, dreadfully boring and slow paced, remember: when it comes to trying to get rich quick, the longer you play the game, the less chance you typically win. On the flip side, when investing smart, the longer you play the game, the greater the odds you’ll come up a success.

Star Wars: Have a good idea for a movie? George Lucas did. To follow in his footsteps, first lock yourself in a room with a legal pad and for the next year or so, do nothing but write an outline to a science fiction story. Then, over the next year or so, expand the outline into a screenplay, and once that’s done, spend the next year re-writing it. With the script finally complete, spend another year raising money to produce it. With financing in place, spend another year filming it, the year after that editing it and once that’s all finally done, take a deep breath, sit back and make a billion dollars.

Lesson Learned: Don’t think success could happen to you? That could be your first problem. Whether it’s building wealth or creating the second most successful movie ever made (behind Gone With The Wind when inflation is factored in), remember: the journey to riches rarely happens overnight. Take, for example, Henry the Electrician, a friend of mine who once made $4 dollars an hour fixing fuse boxes. Tired, worn out and wanting a better life, he one day had the guts to scrape together a few dollars, purchase an apartment on the dark side of town and rent it out. Half a lifetime later, with hundreds of apartments to his name, his personal Star Wars is now a reality, and with a little time and dedication, I’d bet anything one day yours will one day be as well.

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Investing: There’s nano-tech, bio-tech and gen-tech. Derivatives, floaters, collars, straddles and a long list of many other complex investments. While some of these might be all well and good, it’s probably best you listened to Warren Buffet who once wisely told us mere mortals to stay away from things we can’t understand.

Star Wars: There’s tall creatures, short creatures and monsters buried beneath the trash. Blubber-filled giants, underground slugs, women with thin heads and a long list of other bizarre things. While some of these might be all well and good, it’s probably best you listened to Yoda who once wisely told Anakin to stay away from things he can’t understand.

Lesson Learned: Who knew Warren Buffet and Yoda would be so alike? Until this moment, I for one never did. Whether your journey is about destroying an evil empire or building wealth, staying away from things you can’t understand is often a first rule of success.

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Investing: Want to outperform most mutual fund money managers? I do. That’s why when it comes to investing my own money, I often stick with index investing and put my money into things such as the S&P 500. Somewhat sad but irrefutably true, over time, you’ll most likely make more money investing into the simple and mindless S&P than most mutual funds. And if returns aren’t enough to inspire you, what about fees and taxes? Fees in most indicies are typically around two tenths of a percent and investing in indicies rarely causes capital gain taxes until you decide to pay them, not someone else. How good is that?

Star Wars: Legendary effects, wild robots, fantastic chases and places that few people could ever imagine made my popcorn dance, but when stripping away all that cool stuff, what do you really have? A simple and familiar storyline that follows Joseph Campell’s classic thesis that proved all timeless stories can be boiled down to the same, simple storyline that’s been re-hashed a thousand times through heroes wearing many different faces.

Lesson Learned: Forget phone books of investments many investment accounts contain. Who has the time to keep track of those things anyway? Whether it’s creating a movie few will ever forget or making money, remember: it rarely has to be complicated for it to be effective.

I had fun pondering how Star Wars can teach us a few things about our money, and in fact, there were a handful of other “lessons” I wound up editing out. But who knows? Given the examples above, next time you see Star Wars, perhaps you too will realize some of the valuable lessons the classic tale teaches us not only about money, but about life itself.

May The Force be with you.

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This entry was posted on Tuesday, October 9th, 2007 at 10:24 am and is filed under General Investing, Saving Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.