Just Keep Buying

Categories : Finance Investing

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🎯 The Book in 3 Sentences

💡 Key Takeaways

Saving is for the poor, investing is for the rich.
Save what you can. Focus on income, not spending.
Save at least 50% of your future raises and bonuses.
Only buy a home when the time is right.
Think like an owner and buy income-producing assets.
Don’t buy individual stocks.
Buy quickly, sell slowly. Invest as often as you can.
Don’t fear volatility when it inevitably comes.
Market crashes are buying opportunities.

✏ Top Quotes

It’s not about when to buy, how much to buy, or what to buy—just to keep buying.

Saving more is only beneficial if you can do it in a stress-free way.

It is not a financial crisis you need to worry about in retirement, but an existential one.

Fund the life you need before you risk it for the life you want.

📝 Summary + Notes

I. Saving

1. Where should you start?

Expected savings (ES) → Yearly savings. If you are left with 1,000$ each month, ES = 12,000$.
Expected investment growth (EIG) → Yearly return. If you have 10,000$ invested and expect a 10% increase, EIG = 1,000$.
If EIG < ES: Focus more on saving money and adding to your investments.
If EIG > ES: Spend more time thinking about how to invest what you already have.

2. How Much Should You Save?

Savings rules like “save 20% of your income” are so misguided. Not only do they ignore fluctuations in income, but they also assume that everyone can save at the same rate.
The best savings advice is: Save what you can. You will experience far less stress and far more overall happiness.
Savings = Income – Spending

3. How To Save More

Of the two choices -increase income, and decrease spending-, the latter has limitations.
Increases in income aren’t followed by similar increases in spending.
Yes, you can retire at 35 if you live in a trailer. Yes, you can get rich if you work as an investment banker for over a decade. But, no, you can’t accomplish either of these on mindset alone.
Low-paying jobs keep us poor.
The biggest lie in personal finance is that you can be rich if you just cut your spending.
The most consistent way to get rich is to grow your income and invest in income-producing assets.
Methods to temporarily increase income:
- Sell your time/expertise: Easy to do, but doesn’t scale.
- Sell a skill/service: Higher pay, but doesn’t scale.
- Teach people: Scalable, but lots of competition.
- Sell a product: Scalable, but needs upfront investment and marketing.
- Climb the corporate ladder: Less risk, but no control of time and actions.
The goal is to start producing temporary income before progressing to owning money-making assets.

4. How to Spend Money Guilt-Free

The 2X rule: Anytime I want to splurge on something, I have to take the same amount of money and invest it as well.
Maximize fulfillment: Will this purchase contribute to my long-term fulfillment?

5. How Much Lifestyle Creep is Okay?

When you get a raise, save at least 50% of it.

6. Should You Ever Go Into Debt?

Consider debt only to:
- Reduce risk. For example, don’t pay off a mortgage to keep money for emergencies.
- To generate a return greater than the cost to borrow.

7. Should You Rent or Should You Buy?

The right time to buy a home is when you can meet the following conditions:
- You plan on being in that location for at least ten years.
- You have a stable personal and professional life.
- You can afford it.

8. How To Save for a Down Payment (and Other Big Purchases)

If you need to save for something that will take less than three years, use cash. If you are saving for something that will take longer than three years, put your savings in bonds.

9. When Can You Retire?

The traditional 4% rule says that you can retire when you have amassed 25 times your yearly expenses.
Another way to find out when you can retire is when your monthly investment returns exceed your spending.

II. Investing

10. Why Should You Invest?

To save for your future self.
To preserve your money against inflation.
To replace your human capital with financial capital.

11. What Should You Invest In?

Stocks.
- Average compounded annual return: 8%–10%.
- Pros: High historic returns. Easy to own and trade. Low maintenance.
- Cons: High volatility. Valuations can change quickly based on sentiment rather than fundamentals.
Bonds.
- Average compounded annual return: 2%–4% (can approach 0% in a low-rate environment).
- Pros: Lower volatility. Good for rebalancing. Safety of principal.
- Cons: Low returns, especially after inflation. Not great for income in a low-yield environment.
Investment Property.
- Average compounded annual return: 12%–15% (dependent on local rental conditions).
- Pros: Higher returns than other more traditional asset classes, especially when using leverage.
- Cons: Managing the property and tenants can be a headache. Hard to diversify.
Real Estate Investment Trusts (REITs).

A REIT is a business that owns and manages real estate properties and pays out the income from those properties to its owners.
- Average compounded annual return: 10%–12%.
- Pros: Real estate exposure that you don’t have to manage. Less correlated with stocks during good times.
- Cons: Volatility greater than or equal to stocks. Less liquidity for non-traded REITs. Highly correlated with stocks and other risk assets during stock market crashes.
Farmland.
- Average compounded annual return: 7%–9%.
- Pros: Lower correlation with stocks and other financial assets. Good inflation hedge. Lower downside potential (land less likely to “go to zero” than other assets).
- Cons: Less liquidity (harder to buy and sell). Higher fees. Requires“accredited investor” status to participate in a crowdsourced solution.
Small Businesses/Franchise/Angel Investing.
- Average compounded annual return: 20%–25%, but expect lots of losers.
- Pros: Can have extremely outsized returns. The more involved you are, the more future opportunities you will see.
- Cons: Huge time commitment. Lots of failures can be discouraging.
Royalties.

Royalties are payments made for the ongoing use of a particular asset, usually a copyrighted work.
- Average compounded annual return: 5%–20%.
- Pros: Uncorrelated to traditional financial assets. Generally steady income.
- Cons: High seller fees. Tastes can change unexpectedly and impact income.
Your Own Products.
- Average compounded annual return: Highly variable. Distribution is fat-tailed (i.e., most products return little, but some go big).
- Pros: Full ownership. Personal satisfaction. Can create a valuable brand.
- Cons: Very labor intensive. No guarantee of a payoff.

12. Why You Shouldn’t Buy Individual Stocks

Since most people (even professionals) can’t beat a broad index of companies, you shouldn’t bother trying.

13. How Soon Should You Invest?

Better prices in the future are likely, but the best time to buy is now.
Buy now with all your money outperforms DCA (Dollar Cost Averaging) by an average of 4% on the S&P500.

14. Why You Shouldn’t Wait to Buy the Dip

You should invest as soon and as often as you can.

15. Why Investing Depends on Luck

The market performance at the end of your investing years is very important.
In case of a bad market during the first retirement years, consider:
- Adequately diversify with enough low-risk assets.
- Consider withdrawing less money during market downturns.
- Consider working part-time to supplement your income.

16. Why You Shouldn’t Fear Volatility

Buy and hold outperforms staying out of the market to avoid drawdowns.

17. How to Buy During a Crisis

If you find yourself with investable cash during a market correction, it might be one of the best investment opportunities you will ever get.

18. When Should You Sell?

To rebalance.
To get out of a concentrated (or losing) position.
- Find a selling methodology and stick to it. 10% each quarter? 50% at once? Whatever makes you sleep at night.
To meet your financial needs.
The optimal thing to do is to sell as late as possible or average out of your position slowly.

19. Where Should You Invest?

Income Tax:
- Traditional 401(k) vs Roth 401(k): If you think your income taxes will be higher now, then contribute to a traditional 401(k), otherwise contribute to a Roth 401(k).
- You can’t know what future taxes will be.
- Traditional 401(k) can be preferred as it has optionality.
- Roth 401(k) can be preferred for people with high saving rates because maxing out a Roth 401(k) places more total dollars into a tax-sheltered account than maxing out a traditional 401(k).
Capital gain taxes:
- Capital gains can be avoided by using a nontaxable retirement account like 401(k).
Bonds should be into nontaxable accounts and stocks into taxable accounts.

20. Why You Will Never Feel Rich

Because you see other people who are richer.

21. The Most Important Asset

Time