Investor vs consumer: Who is happier?

Every financial guru will tell you to exercise delayed gratification. In brief, it means you should NOT be materialistic until you really can afford to buy things without the need to ask the price first.

Anyway, being an investor first and consumer later is another form of delayed gratification.

An investor is always on the lookout for investment diversification. He cannot be a consumer at the same time because he knows that whatever he spends as a consumer will slow down the process of his wealth multiplication as the money will not go towards his investment.

So, who do you think will be happier? Actually, it may not be the investor.

The reason is because the investor may take his investments way too seriously to the point that he becomes a scrooge i.e. a person who is stingy with money. A scrooge would rather do anything than part with his money.

So, is the consumer happier? He probably is. A real example? Before he buys that latest smartphone, a consumer will feel happy reading about its superior features compared to other older models.

When he eventually buys the new model, he will feel happy because he now owns a smartphone that the majority of others cannot afford.

When he starts using his new smartphone, he will feel happy every time someone exclaims, “Wow, that’s the latest model!”

Anyway, soon he will get used to his smartphone and another new model will be introduced in the market. That’s when he, as a consumer starts thinking again about how to make himself happier.

An older model certainly will not help in his happiness anymore. So, it’s clear that a consumer is happier, but for a short period of time.

What’s the cost for their happiness? RM4,000? Actually, it depends on the period of time. Just RM4,000 in one’s fixed deposit account would grow to become RM4,883 in five years at 4% interest per annum.

That’s not a lot but the typical consumer is also not one who would change a smartphone only once every five years.

The following questions help determine for sure if you are an investor or a consumer.

1. How do you deal with extra cash?

Say you receive a two-month bonus from your company. It’s not recommended you save every single sen, right? However, it would be great if you did, so you could build on your current stockpile of funds, which you could utilise for potential investment deals.

OR are you the kind who prefers to buy all the things you’ve been eyeing for a while now? It’s great to spend some of the money if it makes you or your loved ones happy. This will certainly motivate you to work harder. However, spending all of the bonus and more is another matter.

Depending on whether the purchases you make are fully about experiencing long-term returns or short-term happiness, already gives you a clear idea if you are more an investor or a consumer.

2. Do you focus on return on investment (ROI)? Do you even know what your potential returns are?

If you think of yourself as an investor, then it’s important to understand the types of investments available – the risks associated with each one and the potential returns from what you put in.

When you buy stocks for example, it does not mean that you only consider famous bluechips. This is because these are usually fully priced. How do you then identify unknown stocks that can potentially deliver “bluechip” returns? An investor would seek the answers to all these questions.

The consumer on the other hand, may just buy into an investment their friends tells him about.

The purpose of this article is not to determine who will be happier though. It is meant as a guide for you to understand that over a period of many years, an investor will have accumulated far more returns to buy far more stuff compared to if he bought them earlier.

Of course, for property, the price is usually up OR the size goes down if the price is to stay affordable.

For many other types of goods, prices usually stay almost the same but the features and the specs of a product may get better (specifically technology-based products).

Assuming you still have a working phone today and are in the market for a new phone. RM2,800 will buy you the latest phone. Next year, a phone with the same specs would be half the price while RM2,800 would get you a much better phone.

Yes, this is the reason why consumers will always be poor. They want to stay AHEAD of everyone else.

An investor may not feel that much happier today but in the long term, he will be AHEAD, financially.

No prizes for guessing if there are more investors or consumers out there today.

This article first appeared in

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.