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. 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 truly 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 short while 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 Knicks highlights on ESPN, 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:
LESSON 1: START BY WIPING THE SLATE CLEAN
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 deep, 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 at least four times his size. Impressive stuff, right?
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? Does it come from scores of ads from some 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 some of the costly fund companies, chances are your sub-conscience is carrying a few of those fancy advertisements inside you 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…
LESSON 2: AN OPEN MIND CAN LEAD TO GREAT SUCCESS
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 generally low-cost investment product such as an Exchange Traded Fund are somewhat new and recently started 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 tax efficient income? In today’s marketplace, some investors selling life insurance policies are experiencing some attractive profits. 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 newest 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 consider innovative concepts such as Life Settlements, it’s those with open, educated minds that often find the success they seek. (Please note: Life Settlements are in no way appropriate for all individuals. Before entering in any life settlement, be absolutely sure to evaluate the all the advantages, disadvantages and risks of engaging in such a settlement with a qualified individual).
LESSON 3: STAY AWAY FROM THE HYPE
Investing: I’ll stay away from the windfall of Bernard Madoff clichés and go back a little in time on this one …. Who would you rather be? A sock puppet on national TV promising its stockholders 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 now infamous Pets.com mascot to shame. As most people that experienced the .com bust would now 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 would seem like the way to go, Star Wars proved to us that end of the day, staying away from the hype can wind up saving you from the dark side.
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.
LESSON 4: SUCCESS DOESN’T HAPPEN OVERNIGHT
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 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 winner.
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 few 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, 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 envisioning 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.
LESSON 5: STAY AWAY FROM THINGS YOU CAN’T UNDERSTAND
Investing: There’s nano-tech, bio-tech and gen-tech. Derivatives, floaters, collars, straddles, those infamous CDOs 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 incredibly alike? Until this fleeting 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.
LESSON 6: KEEP IT SIMPLE
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 diversify my money into things including the mindless and boring 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 indexes are typically much less than many managed funds, and investing in the indices 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 a thousand different faces.
Lesson Learned: Forget phone books of investments many 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. (Please be advised: index investing is not appropriate for all investors. Before investing in any index or any investment, please be sure to first evaluate your own unique and personal situation with a qualified advisor).
CONCLUSION
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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