“I Have Come to Believe That God Put Me on Earth to Do This Work”

Set forth below is the response that I wrote to a question put to me at my Beyond Buy-and-Hold column by Kathryn C at the Kathryn’s Conversations blog:

Rob, do you mean “middle class” or just the average investor? I think you mean the average investor, not middle class. (we’re talking about how sophisticated an investor is here right, not if they are middle or upper class?)

Thanks much for stopping by, Kathyrn.

I understand your question. I use that “middle-class” phrase all the time in everything I write. There’s a logical sense in which you are correct. The advice applies to wealthy investors as well as to middle-class investors.

But here’s the thing: I do not care about wealthy investors!

I have nothing against them as people. I have met many kind and giving and smart rich people. I love rich people. But I do not write for them. If they read my stuff, I am grateful. But it is not rich people that I have in mind when I think about investing and organize my thoughts and craft my sentences.

A word that people often use to characterize my writing is “passionate.” To the extent there really is passion there, it is there because, when I write, I have a reader in mind who I am writing to. That reader is a middle-class person. He’s not poor because poor people generally cannot benefit from the money strategies I write about (I love poor people too, of course — I just do not write for them). And he’s not rich because I’m not worried so much about what happens to the money of the rich (as much as I love them regardless).

Say that a person with $3 million in assets suffers a 50 percent loss from doing dumb stuff with his money. He’s still got $1.5 million. He’s upset. But he’s not busted. He still goes to the beach that year.

Now say that a person with $300,000 in assets suffers a 50 percent loss. That may mean that his or her son or daughter does not get to go to college. He or she may well not go to the beach that year because of the fear he feels over what has happened. This is a very different situation.

I had zero interest in personal finance until I lost a job I loved at age 35. All of the work I have done in the saving and investing fields followed from that experience. I hated the feeing of financial vulnerability. I have made it my life’s work to help other middle-class people never experience those feelings. The full truth is that I have come to believe that God put me on earth to do this work (as crazy and scary as that sounds).

Anyway, I love rich people. I wish them all the best in all their life endeavors. I am happy if some of them care to read my stuff. I love the idea of talking things over with them and kidding around with them and all this sort of thing. But the people I am thinking of when I write my words are middle-class people. It is their money worries and hopes that drive me. I am happy to have anyone benefit from the advice. But my intent is to help middle-class people. That’s where my heart is. And every word that I write starts in the heart. I’m not one of these people who strives to be a purely rational being. Not this boy!

I was born in Northeast Philadelphia. That’s where all this is coming from. The people who live there call it The Great Northeast. No outsider has ever been able to figure out why we call it that. But we still do call it that all the same. You can take the boy out of Northeast Philadelphia but you cannot take the Northeast Philadelphia out of the boy!

Rob

Comments

  1. says

    Hi Rob, Your point is very well taken. A rich person doesn’t WANT to lose money, but his life will go on if he does. A middle class person can’t AFFORD to lose money. Doing so will force major changes in his life that may affect his family’s future. Retirements can be postponed (or canceled at the extreme) or as you said, college plans can change.

    It makes a strong case for the necessity of the middle class investor to carefully assess the risk of what he’s getting into and deciding if it’s even worth it. Your columns do a lot to help mitigate that risk, and every middle class investor needs to consider that advice carefully.

  2. Rob says

    Thanks for stopping by, Kevin. For those who don’t know, Kevin is the owner of the Out of Your Rut site, the site that runs my “Beyond Buy-and-Hold” column on Wednesday mornings.

    I was glad that Kathryn asked the question, Kevin. I’m sure that lots of people wonder about it. That word “middle class” pops up all the time in my writing. I think it would be fair to say that my focus on the middle-class investor is the distinguishing characteristic of my writing in this field.

    I would go a step farther than you go in your words above. It is certainly true that middle-class investors need to do whatever study is required to protect their assets. But I believe that ALL in the field need to be concerned about the effect of their advice on the middle-class.

    If the middle-class gets wiped out, our economic system will not work. So we all need always to keep this factor in mind. If the advice is convoluted in some way so that the ordinary middle-class person is not going to see the holes in it, you might want to make some changes for fear of the damage that that sort of advice can have down the road to our entire economic system.

    We need people giving advice for sophisticated investors. We also need to have some people trying to help out ordinary people. Ordinary people are today required to invest in stocks to finance their retirements. So this has become imperative in recent decades.

    Rob

  3. says

    Rob,

    One thing I wanted to add to this conversation is that I think all the recent class warfare is silly. People who think we should stick it to the rich are no better than people who think the poor are lazy.

    Rich people often create the jobs that support the middle class. And, if they get rich doing it and pay a lot of taxes, everyone benefits.

    Regarding the poor, I’ve been there and I don’t recommend it. But, it’s very possible for anyone to step up and make a good living.

    This is still the land of opportunity and all Americans have a chance to live a lifestyle most of the world can only dream of.

    Bret

  4. Rob says

    Bret:

    Thanks so much for stopping by. Your blog is one of my favorites. You have an amazing community there.

    I agree with what you say. I am not someone who favors class warfare. I’m certainly not anti-rich. I want to be rich! My sense is that the majority of middle-class people feel the same.

    My concern is that we may be losing the middle-class. I feel we could go into a downward spiral if that happens.

    I don’t think any of this was intentional. And i think we have a huge opportunity before us to take things in a very positive direction. But I do worry whether the middle-class is as strong today as it was when I was a boy. I think we will become a different kind of country if we lose the middle-class.

    By no means am I suggesting that any special benefits be given to the middle-class. I don’t think most middle-class people want special benefits. I do think we want (and need) access to accurate and realistic information re how to invest in stocks. Given that we need to finance our own retirements, I see that as pretty darn imperative.

    Anyway, I am grateful that you shared your thoughts and thereby added some much-needed balance. The only thing that really bugs me about this site is that one particular individual (me!) I talks too much!

    Rob

  5. says

    Hi Rob! I’m sorry I just saw this now, not so swift on checking my incoming links to my blog, I still barely know how to use the back end of wordpress :)

    I didn’t realize that people classify themselves by “class” when they think about the type of investor they are? I thought people bucket themselves as either “average” or “experienced” etc, since as we know, rich people can be average investors. You’re the first person who I’ve seen write this way (giving investment advice based on class vs knowledge). Interesting!

  6. Rob says

    You’re the first person who I’ve seen write this way (giving investment advice based on class vs knowledge).

    I see your point, Kathryn. It’s nice to have this little niche to myself. On the other hand, it would also be nice to have more friends!

    The thing that makes me different is that I don’t follow the conventional model of understanding how stock investing works — The Buy-and-Hold Model. I believe that Buy-and-Hold was discredited by the research of Yale Professor Robert Shiller, author of Irrational Exuberance. Shiller has published research showing that valuations affect long-term returns. If that is so (there is now a mountain of follow-up research backing up Shiller’s findings), the core idea of the Buy-and-Hold Model — that it is not necessary for investors to time the market — is wrong. Timing is paying attention to price. If a large number of investors fails to time (to pay attention to price), we are sure to have a stock crash and an economic crisis. Valuation-Informed Indexers (followers of Shiller) believe that the first rule of stock investing is that you MUST be willing to engage in long-term timing (we don’t believe in short-term timing, we believe that the Buy-and-Holders are right that that doesn’t work).

    Shiller writes in his book about how the promotion of Buy-and-Hold strategies exacerbates income inequality. ALL investors suffer the effects of Buy-and-Hold. There are many rich people who lost money in the crash or who lost their jobs or businesses in the economic crisis it brought on. But middle-class people by definition have less wealth and thus less ability to take such hits. If you look at the numbers, you see that the promotion of Buy-and-Hold has caused the greatest loss of middle-class wealth in the history of the United States.

    By the way, I haven’t learned how to use the back end of WordPress to this day. It’s something I am always means to get around to and something I am always putting off because I find working on it so darn boring!

    Rob

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