Investment Metaphor #8: World of Warcraft

For those of you who don't already know, I have become the very thing I never thought I would be: an online role playing gamer. The game that did it do me was World of Warcraft, a massively multiplayer online role playing game (MMORPG). World of Warcraft (WoW for short) is an online world consisting of orcs, trolls, elves, warriors, mages, etc. and in which you complete quests and fight battles for loot and for gold. You custom build your character and your character increases in skill level (from 1 to 70) as the game progresses. The first few levels are quite easy to obtain as one learns the ins and outs of the game with a few simple quests to complete.

When I first played the game, it quickly became obvious that getting my character up to the highest level would be a long-haul process. At that time the highest level was 60 (the recent Burning Crusade expansion pack raised the level cap to 70), which seemed like an unattainable goal someday. The good news, though, is that nearly a year later, my character has finally reached level 60. The unattainable goal has been attained (although there is much more to do in the game).

In reflecting on the past year's journey through the World of Warcraft, it occurred to me that there were the makings of an investment metaphor lurking in the World of Warcraft. For many, just like level 60 was for me when I began playing WoW, the goal of financial independence seems like an unattainable goal. Retirement seems too far off and the many hundreds of thousands (or even millions) of dollars it will take to retire well are so disconnected from the money one deals with on a day to day basis, that one cannot help but feel slightly pessimistic about one's retirement savings/planning when first becoming an investor.

The first thing to keep in mind is that retirement planning is a long-haul process, best achieved slowly over time. The same was true of my World of Warcraft goal. Level 60 seemed so far off and so unrealistic, but a year's worth of steady playing brought me to my goal without too much effort. Likewise, the key to success in investing is not to try to beat the market and get rich quick, but rather to invest a moderate portion of your time, energy, and capital over time to let the power of compound returns do the work for you. If I had let the sheer distance from level 1 to level 60 keep me from playing the game, then I would certainly never reach my goal. But I devoted what time and energy I had available (around the activities that make up the bulk of my life such as school and work), and now I have a level 60 character ready to fight some major World of Warcraft battles. The same should be true of your investing style. You should take a small percentage of your income, say 10–15 percent, and put it into long-term investments. If you do this consistently every time you get paid, by the time you reach retirement you will be a wealthy person.

The downside of this style of investing is that it is boring. There is a lifetime of repetition involved in retirement planning. Similarly, in the World of Warcraft, sometimes to advance to the next level or to increase your character's proficiency in his/her trade skill (Yes, the characters have professions in the game. lol), you must spend some time "grinding," which is a term for the repetitive killing of creatures or monsters in the game to get experience points and force your character up to the next level. Grinding is a slow, repetitive, and boring process, but one does it for the greater good of moving the character forward.

Likewise in investing, often one keeps doing the same old thing (saving and investing, saving and investing, ad nauseum) for the sake of being well off in the future. Yes it is boring, but it is also highly reliable and successful. I am a firm believer that everyone should be following this model of investing rather than pursuing flashy get rick quick schemes or sexy day-trading. Rather than pursuing risky venture capital for a business idea that may flop, why not put your own hard-earned money to work for you making more money via long-term growth? True, you may get hit by a bus tomorrow and you would not be able to enjoy the fruits of your long-term strategy, but you could just as easily get hit by a bus tomorrow as a day-trader, so you might as well plan for the future just in case you make it that long!

In conclusion, stick to that long-term strategy (It is actually less important which strategy you choose than the fact that you have some long-term strategy at all!). If it is good enough for the World of Warcraft, then it is good enough for your portfolio. And if you haven't given WoW a try yet, you should give it a go; it may just change your mind about the value of online gaming if you were previously skeptical. You can visit the official World of Warcraft site here to start an account and download a trial copy of the game.