by | 04, Jun 2022

YouTube Video: How To Think Like An Investor

How does an investor think? How do they think about money? Well… they always see an opportunity.

Don’t forget to check out this bonus episode on Youtube!

In today’s video, Dan is going to break down 2 key concepts, time value of money, and opportunity costs. These concepts are essential to the thought process of an investor.

So join us in another bonus episode of Multifamily Investing Made Simple!

Tweetable Quotes:

“The main concept here is that a dollar today is worth more than a dollar tomorrow.” – Dan Krueger

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five rules of investing

The Five Rules of Investing

** Transcripts

How To Think Like An Investor

[00:00:00] Dan: Hey, what’s going on, guys. You want to learn how to think, like the best and brightest investing minds in the world. That’s exactly what we’re going to be talking about today and how to think like an investor

he was going on guys, this Dan crew, Invictus capital. And today we’re going to talk about how to think like, Because investors and the average consumer in America think about things specifically money a lot differently. So we’re going to dive into that today and talk about something. Uh, early in my life in college, actually that has had a profound impact on my happiness, my freedom, obviously my balance sheet and net worth.

And that is some really key concept around about how we think about money and specifically how the investor type of person thinks about money, because it is different. One of the first things you like. In college, if you’re gonna go to school for finance or usually some kind of business, you’re going to have some kind of finance 1 0 1 type [00:01:00] course.

One of the first things you’re going to learn is the time value of money. And the main concept here is that a dollar today is worth more than a dollar tomorrow because you can theoretically turn around and invest that dollar today and earn some kind of yield on it, as opposed to getting that dollar tomorrow, that you haven’t had the opportunity to earn on because you haven’t had the time to do it.

This is a really important concept because. Puts things in perspective when you have to make a decision about what to do and specifically when funds are received and how to prioritize things. And this was pivotal for, for, for, for me, because it’s so prevalent in, in real estate, you get to respect the fact of, of borrowing money for a rate that’s less than inflation or not going to dive into all the details on that today.

But the point that I want to get across to everybody is that money today is worth more than that same amount of money in the. You need to discount the money, your purse you’re expecting to receive in the future to get an accurate, present value. So we’re not going to go down the rabbit hole of what that’s all about, but [00:02:00] one of the key concepts, I think people need to understand, to think like an investor and not a consumer, is that it’s better to receive a dollar today than it is tomorrow.

The other thing that’s taught usually kind of in tandem with that concept is the concept of opportunity. And this is something that I think we can all relate to at some level, but it’s really important to apply to money. Uh, and most people don’t in order to do one thing, you’ve got to not do another thing.

So if you want to hang out with your wife and have dinner with the kids, you can do that, but you’re not going to be able to go to that conference or that work event, or that happy hour with, with, uh, with your buddies. Right. And so you’ve got to kind of give up a thing to do. And that makes perfect sense, usually in a social setting, but we look at that from the perspective of money, that’s where things changed a little bit, and this is where I will drive people around me crazy with the way I think about things, because I look at everything in an opportunity costs and time value of money, uh, through those lenses.

And so when I am going out to buy clothes or a car, you know, you might look at the sticker [00:03:00] price on a jacket and say, oh, that’s you know, $300 jacket. Uh, should we buy that? The average consumer would just think about it in those terms. Whereas I would look at that and say, Yeah, that jacket costs $300. But if I invested that $300 into this thing, that’s producing 10% a year after five, 10 years, I’d have, you know, a thousand bucks, you know, so I’m looking at that as a thousand dollar jacket because I miss out on the opportunity to invest that money because I bought the jacket and that’s that.

Your spouse nuts. If they don’t think like that. And you do at the grocery store, it’ll drive him nuts. Trust me. However, it’s extremely valuable when you’re talking about money, especially on a larger scale and investing, because that is how investors think. Uh, they don’t think like consumers, they don’t think in getting gratification immediately.

They think in what the long-term benefit is of a thing. So I guess the point that I want to make here. A lot of people are focused on the wrong thing in a consumer mindset. Uh, they’re focused on home ownership. They’re focusing on getting that house and owning that even though that might not be the most efficient use of their capital.

And they’re focused on paying [00:04:00] down debt, even if it’s, you know, 3% student loan debt. 9% interest rate environment because that’s, what’s been pitched to them. But if you embrace the concepts of time, value of money and opportunity costs, you’ll be able to do the math with these types of decisions and actually make a decision that makes financial sense and helps you in the long run.

So I hope this provide some value for you guys. If you haven’t already like share, subscribe, push all the buttons down there other than, than thumbs down, no push that. Um, and let everybody know. We’re putting all kinds of content out like this. If you like it, come back soon. There’s gonna be more videos, just like.

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