Jason Hartman - December 2019

Jason Hartman's Financial Freedom Report

Quality Over Quantity The Argument Against ‘Fast-Fashion’ Investing

If you’re anything like me, you can probably see all kinds of metaphors for the state of our economy, markets, and political system reflected in the swarms of people clamoring for the latest iPhone or Urban Outfitters sweater this season. What really gets me is most of those shoppers emerge from the fray with cheap sale items that immediately lose their value, fall apart, and leave them down $20 and worse off than before. This year, mulling over that mindless consumerism reminded me of my fifth commandment of real estate investing: Do not gamble. To distill a complex topic, the opposite of a prudent investor is a gambler — someone who chases after get-rich- quick schemes, fleeting market trends, or other risky forms of speculation. A gambler buys an asset (usually a property) in hopes it will appreciate despite the fact that appreciation is unreliable. They think they can predict market cycles so complex that they elude even Federal Reserve Chair Jerome Powell. Then they’re outraged when, instead of mounting, their wealth starts going down the drain. An investor, by contrast, will only put money into properties that make good financial sense from day one. Where gamblers buy with the expectation of appreciation, investors buy with the expectation of income. Income is reliable — appreciation isn’t. Odds are if you invest in a $100,000 property that

Jason's High Five

This Month Last Month

Mortgage Payment

$1,250

$1,256

Probability of a recession

34.8%

35%

S&P 500

rents for $1,000, you’ll continue to get that same rent month after month. In my experience, in order to be a successful investor and generate wealth, you need to buy up properties slowly, steadily, and after careful consideration. So, what does all this have to do with Black Friday? Well, the eager teenagers stocking up on fast-fashion brands like H&M and Forever 21 are gamblers, betting on what’s trendy (like flipping houses) without considering the long-term consequences. Just like those cheap clothes will fall apart at the seams, trendy impulse investments will depreciate over time and almost always fail to produce steady returns. Here’s the bottom line: You can’t build your wealth by filling your portfolio like an eager teen at a Black Friday bonanza. Instead of heading for the Gap discount bin, you should do what Audrey Hepburn — a true investor — does in “Breakfast at Tiffany’s”: buy a little black dress and a string of pearls that will look classic for a lifetime. When it comes to investing, quality beats quantity.

3,037

3,148

Job growth

219,000

166,000

Wages (year-over-year)

3.5%

3.5%

“HERE’S THE BOTTOM LINE: YOU CAN’T BUILD YOUR WEALTH BY FILLING YOUR PORTFOLIO LIKE AN EAGER TEEN AT A BLACK FRIDAY BONANZA.”

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