The simplest investing ideas are the best ones.
Let's rewind back to 2013. What were you doing? Who were you? Did you know anything about investing? In 2013, if you had just decided to put your money in products you use everyday: Facebook, Apple, Amazon, Netflix, and Google (FAANG) you would have made almost 1,000% on your money by today. That means a $100k investment back in 2013 would be worth $1M today. Here's what those company stock prices were in 2013 vs. 2021.
But it's easy to say that now. In 2013, the success of these companies wasn't obvious. So let's fast forward to 2015. By 2015, the success of each of these companies was somewhat inevitable. But what may have held people back from investing in 2015 was knowing that the price was much cheaper just a couple of years before. Maybe people felt that it was too late to invest because now the price is too high. Let's look at the return of those companies today. If you had invested in 2015, you still would be up almost 500% today. Turning that $100k investment in 2015 into $500k by 2021.
Why am I talking about this? Three reasons.
First, simple investing can be the best investing.
Second, it's never too late.
And third, price bias.
Imagine someone who manages your money today telling you that their entire strategy is investing in FAANG for you. They may be embarrassed to even say this because it sounds so simple. They may feel like they can't charge you a fee for such simple advice. And so what happens is money managers come up with complex ideas and strategies to show you that they are "doing work" and giving you "unique insight", when in reality the best approach may just be the simplest. This is why if I was to sum up my investment thesis on multifamily apartment complexes it's so simple -- "people always need a place to live". I'm talking my own book here so I'm obviously biased, but again, simple investing can be the best investing.
Second, it's never too late. All of these trends pop up and it's easy to feel like "Oh, I think I might be too late for this one - people have already figured it out". Facebook wasn't the first social network (RIP Myspace & Friendster) and Google wasn't the first search engine (RIP Yahoo!). Even when I started this newsletter last year, the meme at the time was "everyone has a newsletter" and I thought it might be too late. It wasn't. Never think you're too late -- you may just be in your own bubble.
And lastly, everyone's favorite -- price bias. When you see something that's worth $100 today, but you know that a few years ago you could’ve bought it at $70 it's hard to stomach paying today’s price knowing how much it's gone up in price. This happens in Real Estate all the time. Buildings that were worth $10M in 2018 are worth $20M today. This one is tough because you never know if you're buying at the top, but if you have conviction in your approach and strategy then you need to underwrite deals based on what you believe the intrinsic value of the assets are.
So, remember:
Keep it Simple
It's never too late
Price is relative
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Have a great Sunday,
Rohun