Why the author of 'The 4-Hour Workweek' doesn't like to invest in stocks — and what he does instead

Tim Ferriss

(Getty/Jemal Countess) Tim Ferriss.

Tim Ferriss has dedicated much of his career to the study of learning.

As a result, he's mastered a lot of things — his career, fitness routine, and even his food preparation, as detailed in his books "The 4-Hour Workweek," "The 4-Hour Body," and "The 4-Hour Chef."

It turns out Ferriss has a unique approach when it comes to investing, as he explained to Farnoosh Torabi on an episode of her podcast, "So Money."

"The purpose of investing is to improve your quality of life," he explained to Torabi. "The intermediate step is achieving a reasonable or aggressive rate of return, but the ultimate objective of investing is allocating resources to improve your quality of life."

For this reason, Ferriss chooses not to invest in stocks, because the process causes him so much anxiety that it ultimately decreases his quality of life.

"I've learned from myself that even if I achieve a high rate of return in a publicly traded stock, it's a bad investment," he explained to Torabi. "Even though I'm making money, I'm miserable doing so. I'm worse off than when I started."

Rather than giving up on investing all together, he's found an alternative: angel investing, which allows him to give his own capital to companies (primarily startups) and advise them, in exchange for an ownership stake.

He likes the sense of control that angel investing allows. "It's a binary decision for me, where I do my homework. I do a ton of due diligence," he told Torabi. "I make an investment or I don't, and then I live with that decision until there's an exit or a failure. And, because I can't, there's no use second guessing myself."

These "all or nothing binary bets" are much less stressful for him than putting money into a stock and anxiously watching it jump around.

This strategy works for Ferriss, but that doesn't mean it has to work for you. "Not all forms of investing are suitable for all people," he emphasized to Torabi.

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