It’s common for those with an interest in personal finance to admire billionaires based on wealth alone. But it’s important to remember that wealth of such magnitude is rarely made through one good investing decision. Instead, it comes as a result of a variety of choices or circumstances.
Not convinced? Here are some compelling reasons why following in Elon Musk’s footsteps is not the recipe for success you might think it is.
Elon Musk can afford to make speculative bets
As of 2022, Musk is worth an estimated $268.4 billion, according to Forbes. By many estimates, he’s the richest man in the world, ahead of other well-known billionaires like Jeff Bezos, Bill Gates, and Warren Buffett.
It should go without saying that Musk and regular everyday investors do not face the same stakes. While a miscalculation in the average person’s stock portfolio can have disastrous consequences, Musk can afford breathtaking fluctuations.
Musk’s risk tolerance isn’t the same as ours
Determining your risk tolerance is an important part of building an investment strategy. In short, the concept of “risk tolerance” refers to the amount of money an investor is willing to lose in exchange for a benefit.
Investors with a higher tolerance for risk are more likely to gravitate to ETFs or stocks. Those with a lower risk tolerance seek safer investment vehicles like bonds. However, there’s high risk tolerance, and then there’s Musk-level risk tolerance.
When you have billions of dollars, you can afford to take huge risks in business and investing.
Musk is secretive about his investments
Musk can be quite secretive about the way he manages his wealth. At no time has it been more baffling to the masses than when Musk was vying to buy Twitter. This decision made many people wonder many things — namely who, what, when, where, why, and how.
The reality is that Musk doesn’t have to tell us why he’s making the investment decisions that he is. And he likely won’t. Unlike Warren Buffett, who must answer to shareholders in his publicly traded company, Musk can invest his money however he pleases.
Musk changes his mind (a lot)
Even if Musk has a reputation for stubbornness, the business mogul has also been known to change his mind — a lot. The most recent example is the aforementioned Twitter fiasco, but he has been known to backtrack on other decisions in the past.
However, it’s likely that what the public witnesses isn’t Musk changing his mind as much as it is him being unpredictable. Not exactly a reliable beacon when it comes to investments. And we know the stock market doesn’t like uncertainty.
Musk likes to stir controversy
Another part of this unpredictability is the fact that you can never be too sure that what Musk says is from a place of sincerity. The billionaire is well known for his ability to stir up a controversy or two.
Whether it’s drama from his personal life, highly controversial statements that border on offensive, or off-the-cuff, tongue-in-cheek comments, Musk is not afraid to speak his mind. And sometimes he seems to speak just for the sake of speaking his mind.
We aren’t on the same timeline as billionaires
Although even the world’s wealthiest haven’t yet cracked the code of living forever, time does't have the same meaning for us as it does for the extremely wealthy.
While most of us are on a pretty straightforward timeline — we work from our 20s to our 60s and hopefully earn enough money to retire — the timeline doesn’t look quite the same for billionaires.
They have the luxury of waiting as long as it takes to get the most out of an investment, and they don’t worry about retirement. It doesn’t make sense for us to follow their cadence.
Musk didn’t make his wealth from investments
Unlike a famous billionaire like Buffett, Musk has not made the bulk of his fortune from investments. He made it by founding and co-founding multiple companies, such as PayPal, Tesla, and SpaceX. So, unless you happen to have several business ideas up your sleeve, you probably can’t model yourself on Musk.
He made some of his wealth from investments, yes, but they were particularly risky ones, and not likely to be ones that the majority of us could make.
It’s also worthwhile to note that Musk grew up wealthy, too. His parents owned an emerald mine in Zambia. He started on third base, as they say.
Musk is an unreliable narrator
Critics have often said that it can be hard to gauge whether Musk is telling the truth. So, even if he were to offer public investment advice, it’s difficult to know if it would be genuine.
Musk even once used the claim that “nobody takes him seriously” as a defense when he was sued for defamation.
You shouldn’t follow someone else’s investment portfolio ... period
Our final point has little to do with Musk, but it’s advice everyone should follow. Because everyone’s individual financial situation is unique, there is no single person whose movements you should mimic.
Instead, you should do your own research and consider your risk tolerance to make investment decisions for yourself. Or, if you have the means to do so, you can work with a financial advisor on your own or even with an online robo-advisor.
You might find success by using one of the best brokerage accounts as well.
In short, you shouldn’t follow in Musk’s investment footsteps because you probably won’t be able to.
According to his public statements, Musk only invests in companies where he has a degree of direct involvement. So, unless you happen to assist in the running of a number of successful companies, you can’t take cues from Musk himself.
That doesn’t mean you can’t find your own version of financial success. Even if you’re not willing to put Musk levels of effort in, you can always check up on the latest lazy money moves that may pay off.
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