Rich Reality: What Investing Will and Wont Do For You

March 19, 2025

Investing

The desire to get rich quickly isn’t a uniquely frum thing, but many of us do have unrealistic investment expectations. With the relentless pressure of parnassah, frum investors often feel like they have no choice but to aim for grand-slam investments. More likely than not however, unrealistic expectations lead to dashed dreams and empty pockets.

Michoel Goldman wanted to get rich. Not for selfish reasons, but because he wanted to get back to full time Torah learning as soon as possible. Michoel wanted to use the $100,000 he and his wife had saved to invest his way to an early back-to-kollel retirement. The wealthy people he knew were all busy investing, whether in real estate, stocks, or other assets. So, he would do the same. He would invest his lump sum until it grew into $5 million. Then it was back to Kollel! It would take 5 years, he estimated, to invest his way to substantial wealth. 10 years at the most.

Is getting rich quickly by investing realistic? If not, why do so many people seem to think otherwise?

Realistic Drive Times

We travel to Toronto once or twice a year to visit family. It’s a 540 mile drive from Lakewood and, assuming no stops, GPS puts it at 8.5 hours. This calculates to an average speed of about 60 MPH and barring unusual traffic, the travel time is indeed roughly as the GPS predicts. Even the most aggressive driver will rarely cut off more than an hour of travel time. It’s just not realistic to expect, say a five hour trip, which would require an average speed above 100 MPH.

Pit Stops Required

Those traveling with a van full of kids can also count on multiple pit stops along the way too, for bathroom, food, and other contingencies. If someone assumes they will cover a drive far more quickly than the realities of the road and passengers allow, they are set up for hours of pressure and disappointment. Worse, there’s a chance they will succumb to frustration and begin driving recklessly while ignoring the needs of hapless passengers. A disaster waiting to happen.

Investors Crashing and Burning

What does this preface have to do with investing? Investors with unrealistic expectations get frustrated when their wealth doesn’t grow speedily. This frustration then leads to reckless investment behaviors, which causes portfolios to crash and burn. There is only so fast you can go without spinning out of control. Some “drivers” may be able to go somewhat faster, but not much.

Financial Pit Stops

Unrealistic investors like Michoel may also ignore typical financial rest stops. Even assuming Michoel can grow his portfolio at a speedy clip, without significant ongoing income coming in from elsewhere, he may need to tap into that pool of assets well before it becomes a large nest egg. Tapping into investments at any point along the road slows down the compounding effect drastically. That is another reason why successful investors need to settle in for a long journey.

Run the Numbers

Let’s use some numbers to back up my assertion that investment success takes a lot of patience. Yes, Michoel is fortunate to start with a good “car”, i.e. $100,000 of initial investment capital. But assuming compounding of that money at 10% consistently, it would take him 41 years to hit his $5,000,000 goal. That’s a fantastic nest egg, but not a quick path back to kollel. Even earning 25% annually, a world-class performance, would bring him to his chosen financial destination only after 17 years of patience and discipline. And taxes and fees would significantly hamper that growth too.

Slowing Down Along the Way

If Michoel needs to touch the portfolio at any time along the way, it will slow down the compounding. Say his $100,000 grows to $150,000 over a few years, but then he needs an extra $50,000 for a new vehicle, home repairs, a Simcha, or just to cover his day-to-day shortfalls, normal in a large family. He’s right back to where started from. In addition to figuring out how to invest, investors need to figure out how they eat along the road! There’s a lot of truth to the old saying, “You need money to make money.”

Mazal Happens…

Sure, mazal happens. Just as there are lottery winners, tiny slivers of people gain immense wealth quickly via a penny stock, cryptocurrency, or leveraged real estate. But there’s no logical plan or approach to get rich quick. Most high-profile investors get rich via a business, itself a mazal laden affair. Then, successful business owners diversify into passive investments to grow and preserve their fortune. And generally, they aren’t expecting their investment portfolios to earn extremely high returns either. Having earned their wealth the hard way, they generally don’t gamble on excessive risk taking beyond their core expertise.

OPM Is a Business, Too

One of the highest profit margin businesses out there is managing investments for others. The investment management industry has a very high failure rate and it’s definitely not for most. But those who successfully accumulate and manage lots of OPM, Other People’s Money, can build massive wealth, relatively quickly. That’s all fine and good, but those who don’t manage others’ money for profit need to recognize that their potential upside is a fraction of the money managers they may try to emulate, but using only their own capital.

Steady Does It, Eventually

Focusing on the tiny sliver of high profile wealthy investors tells a misleading story. Barring some rare mazal or acumen, for the vast majority of those who manage just their own capital, investing is a path to get rich slowly, not quickly. I’m a huge fan of investing for everybody, but reality is a must. You invest to enhance your wealth and bolster your income over time, not create it, yesh me’ayin, overnight. Being realistic is a crucial step to designing an investment program that endures and flourishes, gaining power as time goes on and compounding increases.

Get Real

On the other hand, a plan that, over twenty years, grows a $100,000 lump sum or $1,500 invested monthly into a $500,000-$1 million mutual fund portfolio is very realistic (equaling an 8-12% return). That pot can then be tapped into to pay for weddings and generate steady income to ease the day-to-day parnassah burdens. That may not be Michoel’s dream, however this more modest but grounded plan can still help him tremendously, b’ruchniyus and b’gashmiyus. If he wants something bigger and faster, he’ll probably have to do it by building a very lucrative hands-on business or profession.