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Why overnight millionaires are spoiling it for the rest of us

by Tayo

I remember the first time I heard about Teslanaires – individuals with a nigh-on-religious view of Tesla and Elon Musk, who had invested in Tesla accordingly, and who were now worth millions.  

My wife and I had just walked out of a showing for a home we desperately wanted to buy, with the real-estate developer’s agent. (Beautiful house, by the way.) The agent was consoling us. Long-story short, we couldn’t afford it. We’d run every kind of excel-magic we could run, contorting our budget and forecasts into all sorts of odd shapes, and the outcome never changed: we needed more money.  

It was on our way home from that disappointment that I found the Bloomberg article about Teslanaires. Talk about kicking a man while he’s down! For the whole drive back to our (now incredibly small-seeming) house, the feeling washing over me was one of deep FOMO.  

I work hard. Too hard, some might say. And yet so many things I felt I “deserved” were still beyond reach. How had these people managed to strike it so rich, so effortlessly, with just one stock? And why wasn’t I one of them?  

This wasn’t the first time I’d felt that way, either:  

Before reading about these Teslanaires, I’d read about the COVID geniuses who struck it rich with Peloton, Zoom, and a half-dozen other quarantine-related stocks that benefited from 2020’s lockdowns in the US and around the world.  

Then of course there were the meme-stocks: tockers like Gamestop (GME) and AMC Theatres (AMC) who took their investors “to the moon” without me.  

Last, but certainly not least (and probably the wealthiest) of them all: the Bitcoin millionaires and billionaires who saw BTC @ $60K while all of us were thinking $6K; who predicted $20K when a coin was sub-$100.  

What did all these people know that I didn’t, and when will my time come?  

 

Honestly, the correct answers are probably “nothing” and “never,” and that’s okay.  

 

My guess is – if you’ve read this far – you are an investor, serious about and dedicated to building a stable base of wealth for yourself and your family.  

And the truth is that when it comes to investing and wealth-building, patience, a long-term view, and the power of compound interest are your very best friends.  

What’s not your friend? The speculation that accompanied most of the wins I laid out at the beginning of this story. The reason I dislike those stories so strongly is that they paint a false impression of what it takes to build wealth, and promotes the idea that each of us is just a lucky trade away from making it as millionaires.  

But there’s a reason those stories make the news: because they’re news! The stories are unusual enough to warrant a news organization devoting entire pages of valuable real-estate to the sensational tales of these overnight millionaires.  

Most frustrating of all is the context these stories leave out, the sort of context investors like you and I would benefit from; context like… 

  1. The Scale of Investment: Investment appreciation requires capital and time. Miraculous plays are no different, but when stories about millions being made are told, they often skip the fact that investors have either invested a small amount a loooooong time ago – before it would have been realistic for you to have done so – or the invested a large amount at precisely the right time. 

    In the Bloomberg article I referenced, the initial subject (Brandon Smith) invested $90,000 in Tesla beginning in June 2017, and hadn’t sold a single share at the time of print. While I applaud his luck, there’s a certain incongruence in (a) wanting to invest wisely and ensure financial stability for your family, while also (b) pouring your savings into one stock, on your first attempt at investing ever, then adding to that investment every month, ignoring alternative investments and never selling a share.  

    If you had it, would you put N36 MILLION NAIRA in ONE STOCK? No. It worked for this man, but it probably wouldn’t work for you.  
     

  2. The Stories of Failure Not Being Told: For every Brandon Smith, there are thousands of other investors whose life savings have been wiped out by poorly timed YOLO investments. “Roaring Kitty” was so celebrated over his GameStop-aided millionaire status that he was called to testify before a US Congressional Commission. 

    You know who wasn’t called to testify? The thousands of investors who have collectively lost millions trying to follow in his footsteps. For every seemingly miraculous trade, there are many more untold stories of speculators who didn’t get their timing right, and who set themselves back by decades with a poor trade.   

    We are investors, not gamblers. Ours is to applaud those who happened upon a stroke of luck, knowing they could have just as easily lost it all. And that we could just as easily be doing the losing. 

  3. How Unusual this Truly Is: You’d be forgiven, given the number of “look how rich they got!” articles there are out there, for thinking EVERYONE is making money quickly except you. In actual fact, almost no one is getting rich in these spectacular ways.  As usual, we should let the numbers guide us, with a focus on crypto, the biggest FOMO driver of all:  
  • Millionaires: Estimates suggest that in 2021, there are approximately 56.1 million millionaires on earth. By comparison, there are only about ~100,000 bitcoin wallets holding more than $1M. That’s 0.2% of millionaires  
  • Billionaires: There are ~2,800 billionaires on earth. Among those are 10 billionaires with crypto-currency related fortunes. None of those made their money purely from hitting the jackpot on a currency. Most made their money building crypto-infrastructure like exchanges. Others, like Tim Draper, are primarily tech investors who happened to dabble in crypto.    

So that feeling that everyone is making money overnight with *just* the right move? It’s not based in reality.  

Reality is that the quickest path to generational wealth is to build a successful business or product, and sell it.

As an investor, the surest path to financial stability is a dedicated focus to a long-term, well-diversified investment strategy. Investing as much possible, as often as possible, for as long as possible. 

Tayo

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