Should Entrepreneurs Invest Differently?

What constitutes a life well-lived? The answers will always vary depending on who you talk to. Where ever you go, you will find entrepreneurs who believe that if they can just sell their businesses, everything in life will be easy.

Should Entrepreneurs Invest Differently?

I think Robert Brooker has the concept of entrepreneurs and how to invest nailed down well. Robert speaks about how managing your assets isn’t like running your business and how you have to get real clear on that point. Robert also pointed out how difficult it is for an entrepreneur to switch over to a passive or semi-passive investor.

One of the most incredible things is how Robert Brooker built a fantastic software business; then, he removed himself and let another CEO and a great team run his company. So many people don’t know how to build or manage a team, let alone remove themselves from operations and have the business function well without them.

You can hear the details in the podcast: An Entrepreneur’s Guide to Investing with Robert Brooker. We spoke over a year ago in December 2020, when COVID was ramped up even more than it is now.

You will garner many great tidbits of beneficial information in this podcast to help you negotiate the twists and turns of investing as an entrepreneur.

Finding the Know-How and Balance

In the podcast, you will find information that shows you the difference between the skill set to be a great entrepreneur and the skill set to be an investor — the knowledge gap is deep and wide. It takes time to find the know-how and balance.

Spending Through Your Principal

One principle you have to learn is that you don’t spend through your principal — you create cash flow from instead of spending through your principal to create cash flow — so that you don’t ever dip into your principal. Unfortunately, many investors cannot grasp this principle.

I asked Robert what his secret is to wealth building through investing. I love this — he said, “The biggest secret is luck as an entrepreneur!” And the statement is so true because being an entrepreneur is very risky.

Robert mentions that you don’t have to have significant home runs — but it’s essential to hit some good singles one after another.

Being Humbled

“Once you’ve been humbled a few times, it’s better — you’ll be smarter. I think, to be humbled early in life when maybe the dollar amounts are smaller is better — though it may seem like the end of the world.

It’s almost worse to have a string of successes early in life and then have your disaster happen. When you get overconfident with larger amounts of money, the suffering is worse and the defeat harder to recover from.”      –Robert Brooker

Oh, how I could relate to this statement from Robert. My first investment ended up losing money, and I got sobered up real quick. But from that defeat — I wised up and got some education and some help that I had been reluctant to ask for before.

Help Your Kids Learn Investing With This Game

In order for the next generation of kids to learn about investing — is there something we can do as parents?

Robert taught me a “game” he learned from his grandfather, and I can’t wait to try this with my kids when they are older. Robert Brooker’s grandfather wanted him to learn about investing and bestowed a gift on Robert as a 16-year-old kid. I call this story: The Gift.

The Gift

“Robert,” grandfather said, “We are going to start a game. I will give you fake money — $10,000 to be exact — in fake money. I want you to study the stock market and you will send me a letter postmarked next Thursday, detailing what stocks you will buy with your imaginary $10,000.

Then, for our game — you will continue to study the stock market — and you will tell me which stocks you will buy and which ones you will sell. Each of these changes must be detailed in a letter and I will check and note the postmark.” 

“We will play this game for one year, Robert,” grandfather said. “And here is the deal. If you lose money — nothing will happen. BUT, if you gain money — I will write you a check for whatever the gain is.”

Can you even imagine the gift this grandfather gave to his sixteen-year-old grandson? Few people can understand how this changed Robert’s life. In one year, Robert was up 60%. Of course, a kid that age is not going to know everything about investing in one year, but Robert gained a lifelong excitement and motivation to develop a skill for investing.

Robert’s parents had saved money for when he went to college — which is indeed very fortunate. Saving money for your children’s college fund is another thing I hope to do for my children — and I hope that you will seriously consider doing this for your children.

Instead of just paying out the term bills – Robert’s parents gave him the money and told him that he needed to pay his own tuition, but that there was about three years’ worth of money there. He could probably get four years out of it if he invested the money. His parents reminded him that wise investing would likely give him spending money. Robert Brooker explained to me that this type of help from his parents gave him another four years of investing knowledge.

Conclusion

How lucky we are today to be able to learn great lessons from other people. Robert’s family equipped him with opportunities and expanded his mindset — all while he was pretty young.

This experience can help all of us determine to prepare our own children and educate our friends’ children, too. We can reach out to everyone we can in our circle of influence so that more people can reach a lifestyle level of investing.

Listen to the podcast for more investing savvy about helping your children and families with IRAs, and other investing helps.

Image Credit: MayoFi; Pexels; Thank you!