In our last column, we discussed how real knowledge is the key that helps wealthy investors become even wealthier—and how, over time, it often leads to the transfer of assets from the average novice investor to those with more experience.
My First Investment Wake-Up Call
That lesson became especially clear to me when I first entered the investment maze.
Why High-Income Earners Often Fail at Investing
One of the most striking phenomena I’ve witnessed as a financial manager is the surprising tendency for high-income earners to make poor investments. Early in my career, I began studying my clients’ investment portfolios—categorizing them into “good” and “bad” investments.
What I Discovered Studying Real Portfolios
The results were shocking. The “good” pile was almost nonexistent. Year after year, very few of the investments I reviewed had worked out.
It began to feel like trying to net a rare, elusive butterfly. You take a careful swoop—and end up with an empty net.
It didn’t matter whether the investment was in oil and gas, real estate, stocks, bonds, mutual funds, cattle-breeding programs, or macadamia orchards—they almost always lost money. The more I studied, the more puzzled I became.
Then it finally clicked.
The Mistake Smart People Make
All my clients were highly successful individuals. They worked hard and were experts in their fields. That’s how they’d earned enough to seek financial advice in the first place.
Once they reached a point of financial comfort, they knew they should begin investing for the future. But when they did, those investments often went south.
Why? Because they assumed their professional success could be directly applied to investment decisions. They thought their instincts and intelligence would translate seamlessly into investment analysis.
But it doesn’t work that way.
Investment Success Takes Field-Specific Knowledge
Every investment field is like its own scientific discipline. Real success requires specific knowledge, hard-earned experience, and the ability to ask the right questions.
Would You Compete With Trammell Crow?
Let’s say you decide to invest in real estate. That means you’ll be competing with major players like Trammell Crow Company—one of the largest real estate development firms in the world—and investors like Ross Perot.
Before making your investment, you’ll need to assess site selection, architectural design, tenant mix, rent projections, financing structures, and market demographics. Either you’ll conduct all that research yourself, or you’ll rely on someone else’s prospectus and hope you can evaluate it properly.
Why Experience Always Wins
Clearly, your odds of selecting a successful project aren’t the same as the Trammell Crow Company’s—or Ross Perot’s. Why not?
Because you don’t have decades of experience or a team of expert advisors who’ve learned—through hard-earned lessons—what questions to ask and what mistakes to avoid.
Every Investment Field Hides Its Own Traps
Each investment arena is like a minefield. It looks safe from the outside, but you don’t know you’ve made a mistake until it’s too late. And it’s only after you step on a mine that you learn what to avoid the next time.
Two Ways to Cross a Financial Minefield
There are only two safe ways to cross a minefield:
1. Follow someone who has already walked the path and knows the way.
2. Get down on your hands and knees and move forward slowly—inch by inch.
In the investment world, this means either:
– Learning from the experience of others, or
– Spending years in careful study to become an expert yourself—before investing your first dollar.
Investing Is a Science—When Done Right
Every investment field is a science. And in its purest form—when fully understood—it offers minimal risk and maximal reward. If you had enough years (and enough lifetimes), you could eventually learn to ask all the right questions. The more of those questions you know, the more risk you can eliminate.
💬 Call-to-Action
👉 The best investments start with the best questions.
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