This past week Jim Cramer issued an apology to his viewers and shed a tear on air over his recommendation in June to buy shares of META (Meta Platforms, Inc., aka Facebook) when he claimed META stock had nowhere to go but up and that its CEO, Mark Zuckerberg, was “simply unstoppable.”
Jim Cramer said Meta shares had ‘nowhere else to go but up’ in June, and now he’s sorry... –finance.yahoo.com.
Cramer touted the future of the metaverse, which is “a cool place to go.” reuters.com. So why the apology?
META did go places this week, but it wasn’t up. It went down – by as much as 25% this week. On the heels of less-than-stellar financials, investors didn’t feel the same sentiment as Cramer about META’s prospects.
Seduced by the brave new world of the metaverse where users can immerse themselves into a world of virtual existence – a parallel virtual universe, for lack of a better description – Cramer couldn’t stop touting META’s prospects.
The metaverse is just another in a long line of shiny new objects that attracts investor attention for a little while before something else comes along. Last year it was crypto. Everyone was getting on the crypto bandwagon, including celebrities, but now everyone’s jumping off. Since the peak of crypto in the summer of 2021, currencies like Bitcoin have tumbled more than 64%.
Investors are like kids in a candy store, running from one exciting treat to another. None of these treats will offer lasting nourishment, but they’ll satisfy a craving for a brief moment. Investors don’t want to miss out on the next big thing in this modern, mobile age. They’ll follow the herd and crowd to one next big trend or technology after another. The financial industry takes advantage of this herd mentality to profit from it as money continually exchanges hands to pursue shiny objects.
Smart investors don’t fall for the latest gimmicks. They’ve been around the block and seen fads come and go. During this time, they’ve also seen the investments that have staying power, and it’s not what the youth would consider exciting. Some might say even boring.
Many of today’s youth don’t realize that the generations ahead of them – their parents, grandparents – those who are taking care to ensure their heirs are taken care of are investing in the same assets they consider boring. Once these young generations realize what these boring investments will provide them in the future, they will love these boring investments.
While mainstream investors are content to roll the dice on splashy junk food investments that provide no nourishment, smart investors are sticking with boring – tried and true investments with a track record of building and maintaining wealth. After all, this life-giving wealth will nourish generations to come, unlike the sugar rush investments like crypto and other fly-by-night investments.
Smart investors don’t gamble or speculate on risky new investments. That’s not to say that they’re averse to risk. They’re willing to take on risk as long as they can mitigate it. It’s boring investments like commercial real estate (CRE) private investments in income-producing businesses that allow management to mitigate risks for the benefit of investors through strategic operational and physical improvements and other risk-mitigating measures.
Have you noticed the latest and greatest investments are always about timing? Get in now before the investment takes off to reap the rewards from the gains.
It’s the same thing Cramer was touting when he was pushing META. “There’s no place to go but up.” The problem with this type of timing-based investing is that it’s risky as well as exhausting. Playing the timing game to time when to buy and unload assets to take advantage of surges and avoid dips is time-consuming, and an energy drain.
Savvy ultra-wealthy investors are ultra-wealthy for a reason. They refuse to play the timing game because they don’t have the time or tolerance for the headaches involved with timing investments. They prefer to eliminate all the headaches from their investments. They prefer to lean on seasoned experts with a track record of success to generate passive income and growth to build wealth without getting their hands too dirty. That’s why they prefer simple and boring assets. It’s because simple and boring can be replicated.
Passive investments in cash-flowing CRE and productive businesses allow investors to invest and forget. It also allows savvy investors to clone the template to generate multiple passive income streams to compound wealth. These assets require patience from investors because they’re illiquid and require a long-term commitment.
These are sacrifices smart investors are willing to make because it allows them to put the investment out of their minds and focus on what’s important to them. Besides, when things turn south for the broader economy and investors go on selling sprees, the smart investors know they’re insulated from this market volatility.
Why do smart investors prefer boring?
Because boring assets like CRE and income-producing businesses offer major advantages, the next big thing investments can’t offer when investing passively.
These advantages include the following:
- Cash flow.
- Underlying growth.
- Leverage expertise.
- Insulation from market volatility, inflation, and recessions.
- Tax benefits.
- Risk mitigation through management expertise and experience.
Current generations may not see the value of boring investments like CRE and productive businesses. Still, they will see the value of these assets in the future when their parents and grandparents start leaving them and the cash flow generated from these assets to fund lifestyles their friends chasing shiny objects can only dream about.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.