Blog | Personal Finance

The Bad Boys, the Nice Guys and the Wimps

By classifying your investments into these three buckets, you’ll always know what you’re getting into

One night over dinner, my girlfriends and I came to a realization that there are only three types of men in this world. Yes, you heard me — any man you’ve ever met can be classified into one of three buckets: the bad boys, the nice guys and the wimps. Hear me out.

The bad boy: He’s the guy your dad doesn’t want you to date. He’s exciting, enticing and hard to resist. He’s a challenge, totally unpredictable, and will probably break your heart. Examples include Mick Jagger, Charlie Sheen and The Fonz from Happy Days.

The nice guys: These are your buddies, who are comfortable to be around and nice to talk to. They are safe and usually won’t cause you a lot of headaches. They’re predictable, polite and respectful. Sounds like Richie Cunningham from Happy Days, right?

The wimps: These guys are super dull, have no surprises up their sleeves, and never want to take any risks. Basically they just exist. Yawn. This reminds me of Al Bundy from Married with Children or Homer Simpson.

So why am I bringing this up? Because just as we could pigeonhole every guy into these categories, we can also classify investments by these three types as well. Let’s explore:

Bad boy investments: These are challenging, unpredictable, and you have to pay attention to them. They keep you on your toes. Sure, they’re more work, but they offer the greatest rewards if you know how to handle them!

Nice guy investments: These don’t require as much attention as the bad boys, but that doesn’t mean you can totally ignore them either. Their rewards will never be as great as with the bad boys, but there isn’t as much risk of them burning you, either.

Wimp investments: These are just so boring, you can ignore them forever and not much will change. There is almost no risk associated with the wimps, but that also means there is little-to-no reward either.

Now, let’s examine seven types of investments and where they fall into these three buckets:

Stocks

• Nice guy: Long-term stocks. You’ll watch it regularly to see what it’s doing, but this requires far less effort than “bad boy” day trading.
• Bad boy: Day-trading stocks. Often, day traders sell everything they are holding before the end of the day, so this is a high-maintenance situation.

Trading Stock Options

• Nice guy: Stock options that expire in six months. You’re checking in on it, but not highly active in it.
• Bad boy: Stock options you’re trading on a daily basis. You’re watching the stock prices every minute.

Real Estate

• Nice guy: Let’s say I lend money to an investor friend for the down payment to purchase a property, then in return create a note or IOU (which states the amount of interest she will pay me on the loan), and every month my friend pays me that interest until the amount of the loan with interest is repaid. There’s some risk, but it’s small.
• Bad boy: A 50-unit apartment building that’s run-down, has bad tenants and has 20 vacant units. It’s going to need a lot of attention and effort. Of course, once you get the property operating smoothly, it could turn into a nice guy.

Mutual Funds and 401k

• Wimp: You put your money in and hope that something good happens.

Buying Land

• Nice guy: You just buy it and it sits there. It doesn’t require a lot of attention. Now, if you choose to build a retail or office complex on the land, then it takes the time, effort and education that could easily transform it into a bad boy (which isn’t necessarily a bad thing).

Savings Account and CDs

• Wimp: They don’t do anything. You put your money in and that’s it. The risk is zero, but the reward might as well be zero too.

Gold and Silver

• Nice guy: You’ll need to keep your finger on the price fluctuations, but you know it’ll still be there in the morning (unlike a bad boy).

Please understand that I’m not saying one type of investment is better or worse than another. In order to be a successful investor, it’s important to know the pros and cons of each investment type. Ask yourself, “What are the risks and rewards of each investment I own?” Don’t expect a mutual fund alone to cover all your financial needs in retirement, because it’s not designed to do that — just as rental properties are not designed to be hands-off investments.

Want to learn more? Grab a copy of my book Rich Woman and you’ll be well on your way to choosing the right investments to fit your goals and lifestyle. Still gun-shy about investing? Learn more about risky vs. safe investments here.