book review: the lifestyle investor
The Lifestyle Investor by Justin Donald offers readers a compelling blueprint for achieving financial freedom through strategic, lifestyle-enhancing investments. Donald, a seasoned investor, shares his journey from financial uncertainty to independence, presenting principles aimed at helping readers design a life of abundance and flexibility.
Mr. Donald isn’t exactly a “FatFIRE” type or a “LeanFIRE” type. He’s more a down-the-fairway FIRE guy with an emphasis on wealth as time, in other words reclaiming your life through wise investing, carving out space for more exercise, family time, spirituality, etc. Righteous!
He has the right kind of contrarian mindset about investing. Most of what we’ve been fed since we started thinking about investing is institutionalized crap that’s intended to keep us docile and working away, squirreling away dimes that the big guys skim off of. Here’s a good quote:
The people at the institutions teaching you to invest have the same mindset as the information sources that want your money. Once you give these sources your money (i.e., banks), they make a multitude of money on it, give you low returns, and pay themselves first, regardless of whether they’re making you any money. It’s crazy. And if you continue this insanity of giving them your money without results, you’re as guilty as they are at perpetuating this craziness.
The Righteous Review: 4.5/5 stars
Key Takeaways
Lifestyle Investing Principles:
Donald's ten commandments of lifestyle investing serve as the foundation for his approach. These principles emphasize investments that yield both financial returns and personal freedom, prioritizing life quality alongside wealth accumulation.
Focus on Cash Flow:
A core tenet of the book is the importance of cash flow over appreciation. Donald advocates for investments that provide steady, reliable income, ensuring financial stability and reducing reliance on market speculation.
Risk Mitigation Strategies:
The book provides practical advice on protecting investments through risk mitigation. Donald outlines methods to shield assets from economic downturns and market volatility, stressing the importance of safeguarding one's financial future.
Leveraging Expertise and Relationships:
Donald underscores the value of building strong networks and learning from experienced mentors. He advises leveraging the knowledge and connections of others to enhance investment success.
Long-Term Legacy Planning:
Beyond immediate financial gains, Donald encourages readers to consider the legacy they want to create. He discusses strategies for sustainable wealth that can support future generations.
Those “10 Commandments”
Not to bury the lede, here are the book’s 10 Commandments, as advertised. The Righteous Take? 1, 5, and 6 are the most valuable. That’s really what the book does well to emphasize: if you can think through what investments will cover your expenses with cash flow, and then use other people’s cash flow to get there, you’ve got a winning formula.
Lifestyle First: This principle emphasizes prioritizing investments that enhance your lifestyle rather than just accumulating wealth. This approach is beneficial for maintaining a balance between work and personal life but may limit investment options that require significant time and management.
Reduce Risk: Donald advises minimizing investment risk through due diligence and diversification. This is sound advice for all investors, as it helps protect against market volatility and potential losses.
Find Invisible Deals: The focus here is on identifying under-the-radar investment opportunities. While this can lead to lucrative returns, it often requires extensive research and networking, which may be challenging for novice investors.
Get Paid to Invest: Donald suggests structuring deals in a way that you earn income from the start. This is a useful strategy for ensuring immediate cash flow, but it might not always be feasible depending on the type of investment.
Use Debt to Create Wealth: Leveraging debt to finance investments can amplify returns, but it also increases risk. This principle is useful if managed carefully but can be dangerous for those not well-versed in financial management.
Find Cash Flowing Investments: Prioritizing investments that generate consistent cash flow is a cornerstone of Donald’s strategy. This is a valuable approach for achieving financial stability and independence.
Reinvest Profits: Reinvesting earnings to compound growth is a classic investment principle that helps accelerate wealth accumulation. This is universally beneficial for all types of investors.
Invest in What You Know: Donald advises focusing on investments within your areas of expertise. This reduces the risk of making uninformed decisions and increases the likelihood of success, making it a practical guideline.
Automate Income: Creating systems that generate passive income is key to financial freedom. While this is an ideal scenario, achieving it often requires significant upfront effort and investment.
Build the Right Team: Surrounding yourself with knowledgeable advisors and partners can enhance investment success. This is particularly useful for individuals lacking expertise in certain areas, but finding and retaining the right team can be challenging and costly.
Assessment of Investment Advice Value
The Lifestyle Investor offers a refreshing perspective on wealth-building that prioritizes lifestyle and personal fulfillment. Donald’s focus on cash flow and risk mitigation provides a solid framework for investors seeking financial independence. His emphasis on leveraging expertise and building relationships adds practical value, especially for those new to investing.
However, while the book provides many actionable insights, it is not without its limitations:
Overemphasis on Real Estate and Private Investments:
Donald’s investment advice heavily favors real estate and private investments. While these can be lucrative, they may not be suitable for all investors, particularly those with lower risk tolerance or limited capital. The lack of diversification into other asset classes such as stocks or bonds could be a drawback for some readers.
Limited Attention to Market Dynamics:
The book’s focus on lifestyle investing sometimes overlooks broader market dynamics. While cash flow and risk mitigation are crucial, understanding market trends and economic indicators is equally important for making informed investment decisions. For example, some of the book’s descriptions of real estate investing already feel a little dated in light of what’s happened to real estate markets with rapidly increasing interest rates.
Accessibility for Novice Investors:
Some of the strategies Donald advocates, such as leveraging relationships with high-level investors or engaging in complex private investments, may be challenging for novice investors to implement. The book assumes a certain level of financial acumen and access to capital that might not be realistic for all readers.
Potential for Oversimplification:
While the ten commandments of lifestyle investing provide clear guidelines, there is a risk of oversimplifying the complexities of investing. Real-world investing involves nuanced decisions and constant learning, which the book may not fully address.
An example of oversimplification: Mr. Donald likes hard money loans. That makes sense, there’s a potential for strong risk-adjusted return with collateral-secured private lending. He makes some big logical leaps though in the context of anyone investing on their own and looking for advice:
“These investments, when structured correctly, have a little risk but a high return…” ok those two things don’t belong in the same sentence without a heavy, heavy caveat.
Maybe the caveat is “structured correctly…”? He goes on to enumerate the aspects of a proper structure: 12 month terms, a balloon payment, 12% interest, 2-4 points paid up front… these are the stuff of an experienced real estate investor. For the most part, you need a lawyer to pull this off, and if you come to any hard-ass real estate operator with these terms they’ll tell you to piss off.
That’s why when it comes to Mr. Donald’s asset-specific advice, I’m not gonna do it alone. That’s why I’d look to EquityMultiple, for example, for investing in real estate debt of this type. Because they employ people who know how to negotiate these deals. Maybe I get an 11% return instead of 12%. That’s fine.
All that said, he surfaces a number of interesting ideas for asset allocation and the overall point stands: if you want to reclaim your time and achieve financial independence, you need to be investing in the weird stuff that “big money” (the vanguards of the world) aren’t pushing on you.
Conclusion
The Lifestyle Investor is a valuable resource for those seeking to align their financial strategies with their personal values and lifestyle goals. Justin Donald’s principles offer a practical, lifestyle-centric approach to investing that can help readers achieve financial independence.
However, potential readers should be mindful of the book’s limitations, particularly its focus on real estate and private investments, and consider whether these strategies align with their individual circumstances and risk tolerance. There’s some insouciance around investment access that won’t resonate with all readers. Sometimes it feels like he’s saying more or less “go and find a mobile home park to invest in and negotiate a good deal. Simple!” It isn’t that easy for everyone. Still, the insights on which investments and asset classes to prioritize, and how to think about investments in terms of lifestyle and expenses, are relevant to almost anyone.
Overall, the book is an insightful addition to investment literature, providing both inspiration and practical advice for creating a life of financial freedom.