A Theory on “Spending” You Way to Financial Freedom
What if whenever we wanted a new sweater from the GAP, we also had to spend the same amount of money investing in Gap, Inc.?
From a frugal standpoint, it’s not a bad way to crack down on your spending, since everything now “costs” twice as much.
From an investing standpoint, while it’s not 100% possible (especially if you’re awesome and regularly shop small, local shops), it’s probably more possible than we think. And while it might take an awful lot of little buys at Amazon before you’ve got enough “spent” there to equal a single share of their stock, there are a surprisingly large amount of stocks – even down to REITs if you’re buying a house or utility stocks.
OR you might be shocked at how much you spend at Amazon each year. It wouldn’t surprise me if I’m spending two to three stock shares worth each year. That one-click buy button is dangerous.
Imagine if you doubled the price of gas, but spent that extra money purchasing stock in one of those companies?
There’s a lot of emphases out there on mutual funds and index funds as the way to invest – and I totally agree. A lot of my investments are in funds like that.
However, I’ve noticed over the last few years that I get kind of excited about individual stocks too and I feel like this is a pretty vilified stance in the PF community.
I think if you have the time to do the research though, there’s nothing wrong with picking individual stocks.
What would be wrong would be putting all of your investments in a single stock of any company. Nothing is infallible – but there are quite a few companies out there with stellar track records (aka blue chip stocks) and quite a few little companies that just chug along happily forever.
They might not be super sexy companies (I’m looking at you, Hillenbrand) but they might wind up being one of the biggest winners in your portfolio with no evidence they’re slowing down anytime soon (also looking at you, Hillenbrand).
I also find that as cool as I think owning a Tesla would be, I’d be pretty much just as happy to own their stock – and probably better off making that choice. An actual car depreciates, while a stock in Tesla will hopefully continue to appreciate instead.
Yes I like to think about purchases mostly as investments. A Tesla is nice but it’s a big expense/liability compare to a share of stock, as long as you’re not making any puts or short sells.
Hey Mel,
I think the idea of delayed gratification is lost on a lot of people – basically the idea of not spending on impulse…every single time you have an impulse.
Convincing people to invest isn’t easy because it’s not something most twenysomethings want to think about i.e. the future.
I think it was Warren Buffet who said that he’d rather invest in Coca Cola any day of the week than some untested startup?
Slow and steady investment strategies win out time and time again, and the recent cryptocurrency meltdown kind of proves that.