Jim Rogers’ Financial Advice Could Make You Money
At nearly 80, Jim Rogers has led an extraordinarily successful financial life. With a net worth of $300 million, Rogers is an extremely well-respected financial guru, and he's always willing to dispense advice.
A self-made entrepreneur, Rogers started his lengthy financial career with a business selling peanuts at the age of 5. Today, Rogers’ financial advice is based on what he believes is an upcoming bear market. So he discusses a lot of alternative investment strategies and unique investment advice.
These are Jim Rogers' most important financial strategies, as well as some interesting potential counterpoints.
Invest in Precious Metals
Rogers has advised investors to get into silver, gold, copper and other precious metals for the past few years. While he believes they might disappoint short-term investors, precious metals are in it for the long haul. They tend to perform remarkably well during down markets.
Historically, a loss of confidence within the market leads to an investment in old standards. Geopolitical uncertainty combined with the general upheavals within the stock market could create a world in which gold, silver and copper are the better investments.
Counterpoint: Dave Ramsey Disagrees
American finance personality Dave Ramsey doesn’t agree with Rogers. Ramsey believes that gold, silver and copper are already highly valued and aren’t going to move further.
Ramsey points out that these precious metals have more or less kept pace with inflation over the years rather than experiencing any serious leaps and bounds.
However, Rogers would likely argue that keeping pace with inflation is a great thing to do when everything else is crashing.
Gold Prices by Year
In a chart, it can be seen that gold prices don't go consistently up. They tend to "boom" when recessions hit.
Go Buy a Farm
"Unless we’re going to stop wearing clothes and eating food, agriculture is going to get better. If you really, really love it, go out there and get yourself a farm and you’ll get very, very, very rich,” says Jim Rogers.
Wait. Is this investment guru telling us to homestead? A little more than that.
The reality is that the population is growing and that we need to feed all these people. Agriculture is also closely tied to land values, so as land values go up, your investment goes up.
Plus, we are running out of farmers.
Counterpoint: Investing in Agriculture Is Challenging
The New York Times doesn’t say you shouldn’t invest in agriculture. In fact, it points out that both Bill Gates and Warren Buffett are doing it. But while agriculture is a great strategy toward diversification, the Times does point out that it’s challenging to invest in.
Agriculture’s tether to real estate goes both ways. When the real estate market is volatile, agriculture can become volatile, too. There are a lot of ways to invest in agriculture, and you may need to be cautious as to which ones you use.
Farm Income Has Been Rising
According to Statista, farm income has been consistently rising. But whether that keeps the pace of inflation is another question.
It’s Best to Go Broke at Least Once
In "Street Smarts," Jim Rogers' book about the markets and investing, he says: "Do not worry about failure, I would tell them. Do not worry about making mistakes in life. It is good to lose money, to go broke at least once, and preferably twice.
"But if you are going to do it, do it early in your career. It is better to go bust when you are talking about $20,000 than when you are talking about $20 million. Do it early, and it is not the end of the world."
Counterpoint: Warren Buffet’s No. 1 Rule
Warren Buffett, the fifth richest person in America, has a different rule: Never lose money. Counter to Jim Rogers, Buffett doesn’t believe that investors should have the mindset that it’s "OK to lose money," but rather, should go into every investment prepared to win.
Realistically, Buffett himself has taken a bath on a lot of investments. But his point is that you should do everything you can to ensure that your investments are reasonable, cautious, and tactical.
That's how you make a lot of money.
Invest in What You Know About
Jim Rogers believes that investors shouldn’t be following "hot tips." Instead, they should be conscientiously courting investments that they themselves know about.
If you’re in tech, invest in tech. If you’re in healthcare, invest in healthcare.
According to Rogers, "The way to be successful as an investor is to do nothing until you yourself know it is going to work and is backed by your own research."
Counterpoint: What You Know May Not Be a Good Investment
No one really argues this tip. Both Warren Buffett and Dave Ramsey agree — you shouldn’t invest in things you don’t understand. The challenge, however, is that you may not be privy to knowledge about good investments.
None of the industries you’re a part of might be good investments, and you may not know where to begin. In that case, you need to learn more before you can invest.
Case in Point: Bitcoin
Very few people understand the fundamental, underlying technology of bitcoin, but its transactions have remained steady for nearly 10 years.
Unlike a lot of financial advisers, Rogers actually advises against diversification. He believes that you should be primarily investing in things that you know, and your spectrum of investments may be quite small.
Rather than getting shiny new object syndrome and bouncing from investment to investment, you should instead consider making a few investments that you truly believe in.
Counterpoint: Most Investors Do Believe in Diversification
Dave Ramsey goes over some of the finer points of diversification. Even Rogers acknowledges this can be an all-or-nothing strategy. Either you lose everything, or you become very rich.
Wealthy investors may refrain from diversification, but they also don’t need it. Diversification is intended to prevent you from losing absolutely everything, something that wealthy people don’t need to worry about.
Fidelity Shows How Diversification Helps
Fidelity, in the example above, shows how a diversified portfolio can easily outperform either an all-cash or an all-stock portfolio.
Inaction Is Also an Action
"One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do," says Rogers. "I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. ... I wait for a situation that is like the proverbial "shooting fish in a barrel.'"
Counterpoint: Don’t Wait for the Best Time
People can remain very poor while waiting for a "fish in a barrel" scenario. Many investors suggest that there’s no "perfect time" to invest.
Investors also discuss something called "catching a falling knife." It’s when investors wait so long for a market crash or a market correction that they actually end up missing the exact thing that they were trying to catch.
Timing the Market Can Be Dangerous
This chart shows real estate values from 1995 to 2020. Even those who would have "timed" the market in 2008 could have lost money.
The dip lasted for several years and didn't really recover until 2013.
Read Everything You Can
Jim Rogers says that the best advice he ever received was to "read everything." That doesn’t just mean investment advice. It means everything about an investment.
Do your due diligence. Read meeting minutes and reports. The vast majority of investors are never looking at a single piece of paper.
The more you read, the better an edge you have. And the more you understand about the market.
Counterpoint: You Could Spend Too Much Time Navel-Gazing
But Bob Carlson, a senior contributor to Forbes, points out that many are spending too much time on their investments. When people fiddle with their investments, they actually interfere.
The more money is moved around, the more value is lost. Contemplating "everything" could easily lead to a situation in which something that should be simple becomes complex.
The Best Thing to Do Is Invest Now
The above chart by Business Insider's Andy Kiersz shows that starting to save 10 years earlier has a massive impact by the age of 65.
Asia Is Where to Be
Rogers has remained insistent that China is going to be the biggest bull market. And he’s not just talking about stocks. He’s talking about culturally.
"I know China is going to be the most important or at least a very important and successful country in the 21st century," says Rogers. "I'm very keen on my daughters, and I made it mandatory for both of them to speak good Mandarin and to know China. I am preparing them for the 21st century."
Counterpoint: Chinese Stocks Have Tanked
You may have taken a bath yourself on some Chinese stocks. Chinese stocks have been volatile not just because of the global market, but because of interesting regulatory decisions by the Chinese government.
Wish stocks have plummeted in recent years , off rumors that China would stop allowing foreign trading. Chinese companies are similarly volatile because of the unpredictability of the Chinese government, although Rogers’ broader point may still stand.
Wish Stock (ContextLogic Inc)
As you can see, Wish stock plummeted from $15 to less than $2 in a year. Other online Chinese stocks performed similarly, such as Alibaba which went from $235 to sub-$100.