Investoid

I just finished watching The Pursuit of Happyness, the story based on Chris Gardner’s life. I was putting off seeing it because I wanted to read the book first, but it’s about four titles down on my bookcase so I probably won’t get around to it for another month or two.

The movie is highly enjoyable, and the message is a positive one about perseverance and belief in oneself. The movie also had some strong messages about personal finance, which had nothing to do with the fact that Gardner was pursuing a career as a stockbroker.

The first message was about investing in an asset for future return. Gardner risked his (and his son’s) entire future on taking a non-paying internship for the prospect (but not a guarantee, in fact only a 5% chance) on a well paying job in the future. Gardner believed in his asset’s fundamentals and saw value, and thus staked everything he had. He essentially made an educated, but risky, value bet.

Lesson: be willing to take chances when you believe you’re right. This is similar to what some retire early champions have done, as one in particular (I can’t remember their name right now) risked his entire portfolio on one stock whom he believed was seriously undervalued.

The second message was about the limits of frugality. When Gardner fell on hard times, he had to skimp on everything (including running away from paying a cab fare). However, when he was rewarded for small successes, he indulged him and his son with a bit of relative luxury.

Lesson: despite having a frugal lifestyle where you’re sacrificing for the future, pay yourself a little bit now. I found this message to be particularly important, since I have stated here and on other blogs that I think it is essential to live for now and the future in balance, not too much in either extreme.

I will be discussing this second message in more detail on Monday, as I describe my personal philosophy on what to do with extra income. In the meantime, if you haven’t seen the movie, go rent it!