Lessons from Five Years as a "Private Investor"

Dean at Petty Cash wrote a couple posts here and here about his experience as a full time private investor. I enjoyed Dean’s thoughts on the topic, as I do all of his work, and they got me thinking. Having recently passed my five year anniversary of the transition to private investor, I decided to share some observations from my experience.

Working as a private investor is weird. It might be the only situation where you can quit your regular corporate job with a steady paycheque to do almost nothing and still claim you’re taking a step up in the world. The “almost nothing” piece is an exaggeration. But rare is the week when I have put in 40 hours since I transformed my life in this way.

Having been around the Canadian small and microcap markets for close to two decades, I’ve built up a library of knowledge about many of the companies listed on the TSX. This makes diligence quick in the event that something changes – a new management team, strategy, industry dynamic, or valuation. I’ve also watched situations unfold over years, so it becomes easy to recognize patterns and determine quickly which kinds of opportunities might fit for me. Plus I’ve built a network of other investors looking at the same kinds of stocks, an excellent source of feedback and new ideas. These are assets that take years of intense effort to build and help me to be very efficient at selecting ideas for the portfolio.

I’ve found that spending too much time on the portfolio ends up being a net negative to performance. If I am spending 40 hours a week on stocks, I better be doing something to justify the effort. Working too hard means I will trim or sell positions that have appreciated just because they’ve gone up rather than patiently waiting for the idea to fully mature. Or it will mean that I buy positions in stocks with which I am not completely comfortable just for the sake of doing something.

When you’re on your own, you might spend hours researching a company only to decide it’s not for you and then…well, the research can be saved in a file on your computer, likely to never be reopened again. I may not discuss it with anyone. Of course there is no boss or colleagues for me to share the findings with. That’s an unusual situation to be in and it brings me to my main point, something touched on by Dean in his posts.

There’s not much external validation as a private investor. There’s a reason so many of us blog or post on X. We want you, the external world, to know that we still exist! We don’t have performance reviews. We don’t get a paycheque. We don’t show up to an office. Most of us don’t disclose our results.

So many people say they want freedom. Financial independence. Well, why? Are you sure? What is it that you want the freedom and independence to do? Or the freedom and independence from? Are you prepared for the additional burdens and responsibilities that this freedom carries? It’s really a bigger question than private investor vs. regular employment. It’s about life and whether you are constructing an identity based on external validation and rewards or following something more “authentic”, some kind of inner map or direction. I didn’t realize the extent to which my identity was built on following external maps until I tore up the first map called being a high achiever. And once you begin that process, really commit to it, it doesn’t stop. For me, it was the right choice, really the only choice. But it’s been hard.

It might be harder for me than it would be for others given I came from a corporate job in the investment industry. To succeed in the investment industry you generally have to be intelligent, hard working, and competitive. You have to want to win and live and breathe your results. It’s your identity. So what do you do after 5, 10, 15, 20 years when you’ve made enough money to retire and hopefully built a successful reputation? Do you keep doing the same thing, chasing more, more, more. Or do you face that what brought you into the industry in the first place might have been a flawed premise, what motivates so much of human behaviour is based on a flawed premise – that achieving some goal will somehow make you feel complete.

No, I think I’ve yet to meet a single person who is happier now that they have $3, $5, $10 million or more thanks to all their hard work. In a way, success is a curse. If you don’t have millions, then it’s possible to believe that when you finally do have millions, then you will be at peace and feel complete. But until then, well, how could you? You don’t yet have millions. As Jim Carrey said, “I wish people could realize all their dreams and wealth and fame, so that they can see it’s not where you’re going to find your sense of completion.”

But, once you do have the millions, and you don’t feel complete. Well, that’s a problem. Then what? Some will just continue to increase their spending levels so that they constantly have to earn even more money to sustain their lifestyle. The first $5 million didn’t make me happy, but this next $5 million will do the trick – then I’ll be able to afford the cottage in Muskoka! That’s the path of least resistance.

What’s the alternative? After devoting your life to this pursuit, to stop around midlife some time and say, well, I’ve made enough now, let’s jump off this treadmill and take a giant leap into the unknown. Why would anyone ever do that? You’re making good money, you are being reinforced as having an important job doing important things, the external validation is there. But it doesn’t sustain in the same way as it used to.

When I left my finance job, the reactions from my peers fell into three categories. There were those who were happy for me. Those are the people who, I assume, are generally content in their jobs, perhaps genuinely enjoying the work for its own sake and have fulfillment outside of career. There were those who didn’t understand the decision at all but didn’t seem bothered by it. Those are people who, I assume, haven’t turned their attention to life’s bigger questions. Then there were those who were upset or angry about it. Those are people who, I assume, recognize that the path they are on will not bring them fulfillment but feel trapped by fear of the unknown or excessive spending levels.

So would I encourage others to become private investors if they have the financial means? Yes, I would. But don’t see it as an end in itself. See it as a facilitator of something bigger, an opportunity to turn your attention inwards, to seek wholeness and ponder life’s bigger questions. It’s not a step up on the traditional map of external validation, even if some treat it and see it that way. If that’s what you think it is, you’re going to struggle. It’s a shredding of the map. Take it from someone who resisted the shredding for too long, the quicker you surrender to the destruction of the map called external validation, the faster you will reorient towards a new, more meaningful map.

As a private investor, you are financially independent which means you are free to think independently and to allocate your time and energy in the manner that you wish. You can become less attached to many things, including, somewhat paradoxically, money.

I’ve become a much better investor since I left my corporate job. Investing itself is a mirror in miniature to this broader question of internal vs. external validation. When at a large firm or servicing clients there are pressures to conduct diligence in a certain way, justify your positions, or stick to a certain style. When only reporting to yourself you are unshackled. You can buy a stock that’s completely outside your comfort zone, lose money and move on. I’ve had more than one misadventure now in the possible bankruptcy but 10x upside category. You can change your mind about something for no reason. There’s so much psychology involved in investment decision making that constructing a portfolio in an unfettered environment helps you to learn about yourself.

So do it, if you can. But really do it, in the ripping up the map kind of way. The hard way. Not the “I made it, I’m semi-retired at 40 kind of way”. The “I just jumped out of an airplane without a parachute kind of way”. You won’t regret it. And if you’re thinking about it, or if this post resonates with you, reach out. I’d love to connect.