Like many, my foray into investing began in college after a gaining an appreciation for the stock market. I was attracted to the idea of discovering new companies, investing my cash into their stocks and being able to see my funds in a stock portfolio dashboard. I loved watching those numbers climb. I felt myself getting richer! I believed that I would always invest in stocks and that I would continue to grow the portfolio by compounding my gains and regularly introducing new investment capital into the portfolio.
For years I invested in stocks. I enjoyed modest gains in the form of appreciation and a few high-paying dividends. It felt good to see and experience the growth. Over time, my excitement waned, as did my passion. I eventually decided to sell every single stock and focus on a different asset class (can you guess?). Below are four reasons why I decided to exit stocks as my primary investment strategy.
The volatility drove me crazy
Having easy, reach into the back-pocket and swipe access to your investment performance was one of those exciting features of investing in stocks. On the other side of the coin, I could not stop checking my performance. I could not actively influence any changes (more on that), so all I was doing was obsessively checking in on my stocks. The blessing of accessing real-time performance data is also a curse, because millions of investors are doing the same thing. This is what causes volatility: the emotions of millions of investors and institutions.
Just as quickly as I would celebrate for having purchased a brilliant stock, I would watch the daily, and hourly, ebbs and flows of the market and question my choice. Should I sell? Should I stick to my investment convictions? It started to drive me crazy.
Little to no control of my asset
Mix volatility and lack of control and you can feel helpless. Rather than leading in my investment decision making, I felt like I was simply reacting and following the investment emotions and decisions of others. I love the idea of Carl Icahn, Bill Ackman or Buffet buying significant portions of an organization’s stock, joining the board, taking control of the company’s decision making and adding value. The only problem is, I was not Icahn or Ackman and certainly did not have those types of resources.
The bottom line for me is that unless I have significant capital, I cannot influence a company’s management (aside from my voting rights) to decisions that I would make. The best that I could do is invest in company’s whose management I trust, philosophy i follow and vision I share. It is great for a pure passive and individual investor that wants to ride on the success of a well-driven machine, but did not align with my desire for more control.
It did not support my wealth-building objectives
Finally, for the above reasons and more, I realized that stocks, which may eventually have a percentage space in my personal portfolio, did not truly support my wealth-building objectives. Personally, I did not see myself becoming a multi-millionaire as an individual stock investor. At the rate of my investing, without strategies such as options trading, I could not leverage my buying power and create the wealth that I envisioned to someday have.
Recognizing the importance of focus, I decided to dive into real estate for its wealth-building power (see 4 Wealth Builders of Real Estate). After concluding that real estate is right for me, I wanted to put more resources (time/energy and capital) into that asset class, and I ultimately decided to sell my stocks.
I took a different approach to wealth-building
Today, I am happy with the choice that I made. I believe in a balanced portfolio and diversification, so in the future, I will likely also have exposure to equities. However, my business is built on the real estate asset class, and I love to share its benefits to others who were just like me.
Unfortunately for me, just like many other working professionals who want to invest their funds, I considered stocks as my only available form of investing. It allowed me to invest passively, but did not give me peace, control or support for my wealth building goals. I sold all my stocks and invested in real estate, where today I enjoy all three of those. This is precisely why I believe that everyone should have real estate in their investment portfolio. Even if I remove the comparison of returns from my logic, I know one thing: people will always need a place to live. What a solid asset class!
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– How To Use Your 401k To Invest In Real Estate
