{"id":815,"date":"2020-11-16T15:52:00","date_gmt":"2020-11-16T15:52:00","guid":{"rendered":"https:\/\/robdix.com\/?p=815"},"modified":"2020-11-15T06:38:11","modified_gmt":"2020-11-15T06:38:11","slug":"best-investment","status":"publish","type":"post","link":"https:\/\/robdix.com\/best-investment\/","title":{"rendered":"The best thing to invest in"},"content":{"rendered":"\n<p>When you\u2019re deciding what to invest in, there are two options: you can go for the \u201ceasy average\u201d, or \u201cearned outperformance\u201d.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The easy average<\/h2>\n\n\n\n<p>The \u201ceasy average\u201d is where you just buy a bit of everything in a particular market or asset class. By definition, you\u2019ll then achieve the average performance of the set: you\u2019ll have big winners, you\u2019ll have big losers, but these will largely cancel each other out and the net result will be average.<\/p>\n\n\n\n<p>This isn\u2019t possible in every market: you can\u2019t buy a bit of every residential property in a country, for example. The stock market is a great example of where you can: with a few clicks you can buy into a single fund that owns a piece of thousands of companies across the entire world.<\/p>\n\n\n\n<p>What does \u201caverage\u201d performance look like? In the global stock market, historically you&#8217;ve been looking at somewhere around 5-8% per year after stripping out inflation.<\/p>\n\n\n\n<p>(This is an exceptionally rough range, which you could comfortably make a case for extending at both ends. Remember also that this is the <em>average<\/em>, so any given year could be virtually anything from +30% to -50%.)<\/p>\n\n\n\n<p>If you\u2019re happy with 5-8% per year, the \u201ceasy average\u201d is a great way to go. It doesn\u2019t require any effort, any time commitment, or any special knowledge. In fact, you\u2019re <em>explicitly admitting<\/em> that you don\u2019t have any special knowledge or the inclination to use it: if you did, you\u2019d be trying to beat the average rather than accepting it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Earned outperformance<\/h2>\n\n\n\n<p>What if you want to achieve better than that? There\u2019s nothing you can do to improve the average, so you need to venture into \u201cearned outperformance\u201d. Rather than owning a bit of everything, you own very specific things that you believe will meet your performance targets.<\/p>\n\n\n\n<p>Owning specific things, by definition, involves time, effort and special knowledge. You need to develop the knowledge, research various alternatives, then select your winners \u2013 all of which takes time and effort. Depending on what you buy, the asset might need active maintenance or monitoring. Your strategy might involve regularly selling assets and buying new ones, which takes even more time and effort.<\/p>\n\n\n\n<p>The list of what you can invest in to achieve your earned outperformance is a long one:<\/p>\n\n\n\n<ul><li>A selection of deliberately chosen shares\/bonds, or share\/bond funds <\/li><li>One or more individual physical properties<\/li><li>A large equity stake in an individual company, including your own<\/li><li>Private lending<\/li><li>Private equity<\/li><li>Angel investing or venture capital<\/li><\/ul>\n\n\n\n<p>There are plenty more, too: that\u2019s just what I came up with off the top of my head.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Where to turn for outperformance<\/h2>\n\n\n\n<p>So, which of these options should you choose to invest in?<\/p>\n\n\n\n<p>You might think \u201cthe one with the highest potential return\u201d. But actually, they\u2019re all surprisingly similar:<\/p>\n\n\n\n<ul><li>When it comes to investing in shares, it\u2019s probably safe to assume you won\u2019t out-perform Warren Buffet \u2013 and he\u2019s averaged about 15% after inflation for the last 25-ish years. You might be able to beat 15% in an individual year, but not as an average over time.<\/li><li>Investing in physical properties probably tops out at about 15%-20%, regardless of whether you\u2019re holding for the long term or cycling in and out of deals.<\/li><li><a href=\"https:\/\/www.marketwatch.com\/story\/private-equity-returns-have-gone-up-that-may-not-last-2020-06-18#:~:text=published%20in%20February%20showed%20that,S%26P%20500%2C%20the%20report%20showed.\">Private equity returns<\/a> have averaged 15.3% over the last decade. <\/li><li><a href=\"http:\/\/www.angelblog.net\/Venture_Capital_Funds_How_the_Math_Works.html\">Venture Capital funds<\/a> target 20% as an acceptable minimum.<\/li><\/ul>\n\n\n\n<p>So assuming you\u2019ll do a good job of picking your investments but you won&#8217;t be the best in the world, 15% is looking like a decent upper bound.<\/p>\n\n\n\n<p>Choosing based on the return you can make isn\u2019t going to work, then, because they&#8217;re all pretty similar. Instead, you could choose based on the characteristics of those returns (some are steadier year to year than others; some consist of regular cashflows while others are more lumpy), which would be a reasonable thing to do.<\/p>\n\n\n\n<p>But my answer for what to invest in is <strong>whatever you&#8217;ll find consistently interesting and want to spend time on for years on end<\/strong>.<\/p>\n\n\n\n<p>Why? Because remember: we\u2019re talking about \u201cearned outperformance\u201d, which means you\u2019ll need to develop specialist knowledge, and invest time and effort. If you don\u2019t find it consistently interesting, you either won\u2019t do it well or won\u2019t do it at all.<\/p>\n\n\n\n<p>So when people debate whether property is better than shares, whether the risks of private equity are worth it, whether you should own a business, and so on and so on, it\u2019s missing the point. <strong>All investments can work equally well, and there\u2019s only right or wrong <em>for you<\/em><\/strong>. <\/p>\n\n\n\n<p>Some people will never get tired of scrutinising companies\u2019 financial statements. That\u2019s great. Others can\u2019t get enough of seeking out property deals and planning renovations. That\u2019s great too. It just makes no sense to convince the person who enjoys one thing that they should actually be doing the other.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">None of the above?<\/h2>\n\n\n\n<p>What if you\u2019re not interested enough in any potential investment for you to give it time and focus over the long term? That doesn\u2019t make you abnormal \u2013 in fact, it\u2019s only a minority of people who are wired to care about this kind of thing.<\/p>\n\n\n\n<p>If you&#8217;re just not interested, then I\u2019d encourage you not to do it at all. Instead, take the \u201ceasy average\u201d \u2013 and if you\u2019re going to put your effort anywhere when it comes to improving your finances, put it into <a href=\"https:\/\/robdix.com\/investing-saving-earning\/\">earning more or saving more<\/a> instead.<\/p>\n\n\n\n<p>After all, \u201cearned outperformance\u201d is going to earn you (when done well) roughly in the region of double what you could get by taking the average. So if you focus on earning twice as much and invest it in the average, you\u2019ll end up in exactly the same place \u2013 in a way that\u2019s more enjoyable and natural for you.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What&#8217;s better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it&#8217;s not based on percentage return&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The best thing to invest in - Rob Dix<\/title>\n<meta name=\"description\" content=\"What&#039;s better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it&#039;s not based on percentage return...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/robdix.com\/best-investment\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The best thing to invest in - Rob Dix\" \/>\n<meta property=\"og:description\" content=\"What&#039;s better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it&#039;s not based on percentage return...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/robdix.com\/best-investment\/\" \/>\n<meta property=\"og:site_name\" content=\"Rob Dix\" \/>\n<meta property=\"article:published_time\" content=\"2020-11-16T15:52:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-11-15T06:38:11+00:00\" \/>\n<meta name=\"author\" content=\"Rob\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Rob\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/robdix.com\/best-investment\/\",\"url\":\"https:\/\/robdix.com\/best-investment\/\",\"name\":\"The best thing to invest in - Rob Dix\",\"isPartOf\":{\"@id\":\"https:\/\/robdix.com\/#website\"},\"datePublished\":\"2020-11-16T15:52:00+00:00\",\"dateModified\":\"2020-11-15T06:38:11+00:00\",\"author\":{\"@id\":\"https:\/\/robdix.com\/#\/schema\/person\/8a17b90170244af4aef79432b2dac191\"},\"description\":\"What's better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it's not based on percentage return...\",\"breadcrumb\":{\"@id\":\"https:\/\/robdix.com\/best-investment\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/robdix.com\/best-investment\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/robdix.com\/best-investment\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/robdix.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The best thing to invest in\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/robdix.com\/#website\",\"url\":\"https:\/\/robdix.com\/\",\"name\":\"Rob Dix\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/robdix.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/robdix.com\/#\/schema\/person\/8a17b90170244af4aef79432b2dac191\",\"name\":\"Rob\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/robdix.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/1dec2d522d3bbde40068a848d288d9c7?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/1dec2d522d3bbde40068a848d288d9c7?s=96&d=mm&r=g\",\"caption\":\"Rob\"},\"url\":\"https:\/\/robdix.com\/author\/djy7g\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The best thing to invest in - Rob Dix","description":"What's better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it's not based on percentage return...","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/robdix.com\/best-investment\/","og_locale":"en_US","og_type":"article","og_title":"The best thing to invest in - Rob Dix","og_description":"What's better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it's not based on percentage return...","og_url":"https:\/\/robdix.com\/best-investment\/","og_site_name":"Rob Dix","article_published_time":"2020-11-16T15:52:00+00:00","article_modified_time":"2020-11-15T06:38:11+00:00","author":"Rob","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Rob","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/robdix.com\/best-investment\/","url":"https:\/\/robdix.com\/best-investment\/","name":"The best thing to invest in - Rob Dix","isPartOf":{"@id":"https:\/\/robdix.com\/#website"},"datePublished":"2020-11-16T15:52:00+00:00","dateModified":"2020-11-15T06:38:11+00:00","author":{"@id":"https:\/\/robdix.com\/#\/schema\/person\/8a17b90170244af4aef79432b2dac191"},"description":"What's better \u2013 shares, property, private lending, angel investment, something else? There is a right answer, but it's not based on percentage return...","breadcrumb":{"@id":"https:\/\/robdix.com\/best-investment\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/robdix.com\/best-investment\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/robdix.com\/best-investment\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/robdix.com\/"},{"@type":"ListItem","position":2,"name":"The best thing to invest in"}]},{"@type":"WebSite","@id":"https:\/\/robdix.com\/#website","url":"https:\/\/robdix.com\/","name":"Rob Dix","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/robdix.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/robdix.com\/#\/schema\/person\/8a17b90170244af4aef79432b2dac191","name":"Rob","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/robdix.com\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/1dec2d522d3bbde40068a848d288d9c7?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/1dec2d522d3bbde40068a848d288d9c7?s=96&d=mm&r=g","caption":"Rob"},"url":"https:\/\/robdix.com\/author\/djy7g\/"}]}},"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"Rob","author_link":"https:\/\/robdix.com\/author\/djy7g\/"},"_links":{"self":[{"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/posts\/815"}],"collection":[{"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/comments?post=815"}],"version-history":[{"count":2,"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/posts\/815\/revisions"}],"predecessor-version":[{"id":853,"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/posts\/815\/revisions\/853"}],"wp:attachment":[{"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/media?parent=815"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/categories?post=815"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/robdix.com\/wp-json\/wp\/v2\/tags?post=815"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}