Are you familiar with the biblical story of David vs. Goliath? I am guessing most of you are. Through some miracle, small David, vanquishes Goliath, the very large creature who could crush a man's head with his hands. Was it a miracle? Maybe, but I think there is a simpler answer. It should have happened! David should have whipped up on Goliath. Let's explore and see how it connects to financial freedom.
Let's start with a wonderful book written by Malcolm Gladwell, aptly named, David and Goliath. Gladwell tells the story from a different perspective. As he looks at the situation, it becomes clear to him what really happened. David won the battle with Goliath because David played the game that he could win (slingshot at a distance). He did not play Goliath's game (walk up, face to face, and beat him up).
David was smart enough to keep his distance and with his handy slingshot, he was able to take Goliath down using Goliath's weakness (bad eyesight). David simply played the game in a way where his odds improved dramatically. Rather than being surprised that he won, we should be surprised if he didn't win. When probabilities are on your side, the odds of winning go way up. David put the odds on his side.
What does this story have to do with personal finance and reaching financial freedom? I bet some of you already know. If you are going to get your finances in order and not just survive, but thrive, you will need to play the game in a way where the probabilities are on your side. You don't play the game Goliath wants you to play (business marketing to include Wall Street). Of course not. You play the game YOU can win!
What does that look like? You are educated by the right teachers (not salespeople). You spend far less than you earn (don't succumb to advertising). You save the difference. You take those savings and invest in low cost index funds. You manage emotions. You do it month after month, year after year, and decade after decade. You end up reaching financial freedom faster than you ever imagined.
You end up playing the game you can win. That is what David did. That is what you and I can do with our money. Do most people do that? No. Why do most people play a game that is stacked against them. They play a game where the probabilities are not on their side? Why do they try to beat Goliath in a fist fight? It makes no sense and yet, most people play that game. Let's take a look.
Trying to impress people with what you own is losing (consumerism. Getting in and out of the market (timing the market) is losing to Goliath. Trying to pick managed funds to outperform the market loses to Goliath. Goliath wins when the odds are in his favor. You win in the long run, when the odds are in your favor. That takes us to low cost index funds. Probabilities are now on our side, playing the game we can win.
Allow me to state an obvious point. When you play the lottery, go to the casino, get on that phone to do sports betting, you are going to lose in the end. I would hope no one disagrees with that. It is simply the truth and yet, billions of dollars are spent gambling, playing a game Goliath wins again and again and again. That is like David walking up to Goliath and telling him to put his hands up. It will not end well for David.
The key here is quite simple, and yet, many people make it complicated. Identify how to play the game of money so the probabilities are on your side. Once you learn that, then you simply repeat the process again and again. Don't try to identify a better mouse trap, it doesn't exist. Living well below your means and saving into a portfolio of diversified low fee index funds has been and will be a winning solution.
Will Goliath go away after he has been defeated? No, he will be replaced with another Goliath who might just be bigger, stronger, and smarter (AI?). It doesn't matter. The key is to keep playing the game that we can win. If we do that, Goliath will drop like a rock, via slingshot of course. Ultimately, it comes down to us. One type of Goliath (Wall Street) loses his power when you see its weak spot (fees).
We must stay vigilant. Goliath will continue to spend billions of dollars marketing themselves, trying to convince us that we should play their game. It's kind of like Goliath telling David to come on down and have coffee with him. That is simply a ploy to get him close so he can pummel him. Marketers to include Wall Street do the same thing. Don't fall for it. Keep your distance and keep investing with the index funds!
