Money Grows on Trees

Summary: How to program your brain — and your bank account — for long-term financial success, like planting a “money tree.” Subscribe here and follow me to get more mental tips and tricks.

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I spent this week planting trees.

Last weekend was Tax-Free Weekend™ in Massachusetts, which is designed to stimulate the economy, so my wife and I stimulated it by buying some trees.

We went to our local plant nursery, where we were delighted to find they had a markdown section, since we’re approaching the end of the growing season. (You know how I love a bargain.)

This was not a Home Depot, homes: this was a classy joint, with specimen trees that had been marked down 75%. They were still healthy and beautiful, so we scooped up those saplings and sowed them in the soil.

Planting a tree – planting anything, really – is extremely satisfying. It’s work, of course: you’ve got to dig the hole, mix in your fertilizer, soak the root ball with water, fill it in, then water, water, water.

But you have the sense that you are doing something positive and long-lasting. You are starting (or continuing) some natural process that will endure. And when you’re planting trees, they will likely endure longer than you will.

This is the mental attitude we must have as investors: we’re planting trees.

How to Grow Money Trees

Growing up, my parents always told me money doesn’t grow on trees. (It would, if we used leaves as currency, but then we’d have serious inflation every spring.)

But money, in a sense, does grow on trees: you’ve got to carefully plant your investments – whether that’s an investment in yourself, like education, or monthly investing into bitcoin – then water, water, water. (There’s a reason we call it steady-drip investing.)

This is not the way most investors get into crypto: they’re looking for the Magic Internet Money that will give them short-term pleasure and status: the Lambo, the yacht, the $12 million Bored Ape.

It’s hard to get our brains to care about the long term, because they are short-term pleasure machines.

Our brains evolved about 200,000 years ago, and they haven’t changed much. Back then, life was brutish and short: your primary tasks were to “eat and mate.” Get food and get busy: these are short-term goals, and they formed our short-term brains.

The good news is that we can retrain our brains.

In “Short Term Thinking is a Long-Term Problem,” Stelian Nenkov shows how short-term thinking is counterproductive to long-term investing. He uses an example from Nassim Nicholas Taleb’s book Fooled by Randomness, showing that even a high-performing investment will look worse and worse the more often you check it.

Crypto investors are surely familiar with this phenomenon: the endless refreshing of the bitcoin price feed quickly becomes a sea of noise, as our brains can’t make any sense of short-term price movements. It’s only in hindsight that we can see how we’ve done.

The article goes on to quote legendary investors like Warren Buffett, Jamie Dimon, and BlackRock’s Larry Fink, who have all suggested ways to get investors out of short-term myopia. (Read Buffett and Dimon’s opinion piece in the Wall Street Journal.)

If these financial titans are locked in for the long term, let’s follow their lead.

Think long term: Warren Buffett didn’t get insanely rich until late in life.

That’s why our approach is to create set-it-and-forget-it investments. You plant once, and they’re watered automatically, with a monthly contribution from your bank account.

Most short-term get-rich-quick schemes fail. (Even if they succeed, you think, “Hey, this is easy,” and fail hard the next time.)

Most long-term investing approaches, on the other hand, succeed. It’s like trees: with the right selection and the right care, most trees take root, grow, and thrive. They’re pretty hardy. Check out this bad boy:

That’s why our approach is to create set-it-and-forget-it investments. You plant once, and they’re watered automatically, with a monthly contribution from your bank account.

Most short-term get-rich-quick schemes fail. (Even if they succeed, you think, “Hey, this is easy,” and fail hard the next time.)

Most long-term investing approaches, on the other hand, succeed. It’s like trees: with the right selection and the right care, most trees take root, grow, and thrive. They’re pretty hardy. Check out this bad boy:

Types of Money Trees

Investing in yourself. The best investment you can make is yourself: Going back to school, getting professional certifications, even watching YouTube to learn new skills. These add to your market value, which adds to your earning potential.

Retirement plans. If your employer offers a 401k plan, use it. If they match your contributions, take it. (Free money.) If you’re self-employed or a gig worker, get a self-employed 401k. No excuses.

College savings plans. If you have kids, start a 529 plan, which lets you set up tax-deferred monthly contributions. (As parents of college-aged kids, we are so glad we started saving when they were born.) Bonus: you’ll be more likely to send them to college.

Starting a business. It’s not for everyone, but your own business – even a side hustle – can be a tree that produces long-term financial fruits. Before you make the leap, be sure you have enough savings to get you through tough times. (Your odds will be improved by going to business school first.)

Blockchain Believers Portfolio. Of course, you can also use our method of crypto investing to build wealth over the long term. It’s a diversified approach that, unlike the other crypto “plans” out there, balances risk and reward.

Planting on Two Levels

Planting your financial trees is important. But planting your mental trees is even more important.

The reason I spend so much time writing about the mental level is because you can’t build long-term wealth without it. Like lottery winners or young sports stars who blow their winnings in a year, you’ve got to have the right mindset.

The tree-planting mindset.

We’ve covered a number of specific techniques for developing the right mental mindset:

• Repeating helpful thought loops. See last week’s newsletter on Émile Coué’s affirmation that hypnotized the Western world.
• Writing down who you want to become. See our column on Ruby Payne’s wealth worksheet to jump social classes.
• Reading about other great investors or entrepreneurs. Our Read and Grow Rich reading list is a great place to start.
• Taking a financial planning or investing course. A good course, taught by a reputable financial advisor, can change your thinking … and your life.
• Staying subscribed to our newsletter. Note each newsletter has a new “seed thought” to grow your mind.

This week, plant some trees — and keep them well-watered. And whenever you need some inspiration, just think about this guy.