What Your Car Says About Your Investing Style And Money Making Acumen

This is a fun guest post from PK, a software engineer who writes at Don’t Quit Your Day Job…, a site which covers the intersection of personal finance, investing and economics. Follow DQYDJ if you care about the story behind the story.

Quick: what was the fastest production car that General Motors made in 1987?

The Corvette? A common answer – but the performance champion was the lesser known Buick GNX, which lives on today in the Buick Regal. (The Corvette lives on today in, of course, the Corvette)

Cars & Investing: A Universal Language!

So… why cars?

Well, first, I’ll be in fine company; this site has a history of well-reasoned articles about cars, what with the seminal 1/10th rule on car buying or its cousin, the 5% of net worth car buying rule. However, that’s not the full reason.

Like most engineers still in the workforce, I’ve spent a fair amount of time on Slashdot (tagline: “News for nerds, stuff that matters”) over the years. One of the tongue-in-cheek memes of that site (and, really, engineering-focused sites in general) is the venerable car analogy. No matter how complicated the topic, there will always be an argument as to how cars, trucks, traffic, roads, and other self-directed transportation-related items can somehow shine a (head)light on the topic. If the readers on those sites cared about investing, I’m sure you’d already have seen similar analogies put forward.

But, they don’t – and we do.

So, how would you describe the major classes of investors – passive, technical, growth and value – with car analogies? Let me take a shot first, then let’s hear your improvements in the comments!


In Ferris Bueller’s Day Off, Cameron’s Father’s ‘choice’ Ferrari 250GT California was just a replica… (Wikimedia)


The Passive Investors

Excuse my mixed metaphors, but let’s bat lead-off with the easiest one!

Passive investors may just be the smartest investors of the group – whether they decide not to delve into the intricacies of the market due to academic research, comparative advantage, or merely intimidation or not knowing where to start – these investors aim to closely approximate returns of a widely diversified basket of securities.

The language of the passive investor reflects the philosophy: just deep enough to explain some asset classes and maybe a few types of funds. “Target Date Mutual Funds” are the ultimate signal of a passive investor, although many will want to balance asset classes themselves between International and Domestic Stocks and Bonds, plus Cash, and (for some), Real Estate Funds. It’s not a horrible strategy – note our own S&P 500 return calculator, which shows impressive results for even the laziest indexing strategies… and a related calculator which shows the S&P 500 returning 5% after inflation for 87.42% of all 40 year periods. You could do a lot worse.

The passive investor is the man or woman who goes to the car dealer and asks for the newest model year Honda Accord, Toyota Camry, Mazda6Ford Fusion or Chevy Malibu. Our passive investing hero holds that car for 5-10 years, only to replace it with another example from the same class.

Maybe they deviate a bit sometimes – A Civic? An Altima? Buy Used? – but the philosophy doesn’t change, and it serves them well. Think about it – most issues are covered under warranty, and although they don’t have the flashiest, fastest vehicles… they avoid many of the problems faced by drivers of the more exotic choices available from the fine motor vehicle companies on this planet.

Those are some reliable vehicles and cheap to fix. They won’t stick out, but they can easily keep up with traffic.

The Technical Investors

I personally consider myself somewhere between the passive investing and value investing camp – I’m mindful of my lack of information on lots of asset classes (what… you really think you can pick individual Emerging Markets stocks from your couch?), but I’ll gladly invest in individual American companies. Technical Investing is my blind spot – I can understand, conceptually, how it is supposed to work, but just can’t see it working too well in practice.

Follow me here – technical investing generally ignores the fundamentals of a stock or security, instead concentrating on its price movements (and the derivatives of said movements). Its language is pseudo-scientific; technical investors would like nothing more than for stocks to obey equations and concepts derived from physical fields – momentum, gravity, inertia, resistance, spring constants and the like – but for every successful trade, there is a potential looming disaster.

It’s not that technical investing can’t work; I’m sure there are still exploitable patterns in the market that haven’t yet been arbitraged away – there are lots of recent examples of timed buying and selling which could have been traded upon. Again, could be – by a computer programmer smart enough to not only update signals at a fixed time… but not to a day trader drawing resistance lines on graph paper in the spare bedroom. Fact is, to exploit technical signals nowadays you need to make some crazy leaps of logic – if investors react a certain way, you can’t just trade against that… you need to know how computers will react, then how other computers will react to the reaction, so on, and so forth. Remember, up to 80% of trades in American markets are algorithmic… I just can’t see Bollinger Bands and 50 Day Moving Averages cutting it anymore.

A technical investor is a strange type when it comes to cars – instead of asking to test drive the car, a technical investor will look at a graph of the distance traveled by one vehicle. Since the derivative of position is speed, and the derivative of that is acceleration, the technical investor can create a ton of pseudo-scientific numbers by just playing around with a price chart. The investor will then try to guess if a car is a good buy on just a simple graph of the car moving around.

Is it safe? Was it souped up illegally? Was it in traffic? Was it going downhill in a hurricane with wind at its back? Was it a replica made for a movie and not worth $10,000,000 (see picture 1)? Uhh… do the brakes work?

These questions matter not to the technical investor!

So, although the investor will sometimes end up buying a super-car, technical investors are also liable to end up with Ford Pintos, Yugo GVs, or late 80s Ford Mustangs and Chevy Corvettes (the latter holds the dubious award of being the most dangerous – in terms of deaths – car in American history).

And, seriously, if you’re a technical investor – care to educated us on the difference between a Hanging Man and a Hammer?

The Growth Investors

Growth investors are, ostensibly, people who recognize the (perhaps lofty) valuation of a firm’s shares but believe that it is justified (or undervalued) because of the growth prospects. In their purest forms, Value and Growth sort of blend together if you squint hard enough – people like Peter Lynch fall into the “Growth at a Reasonable Price” camp, and Growth even has some claims on Warren Buffett (as opposed to Benjamin Graham’s and David Dodd’s pure value methods). The ‘Reasonable Price’ in that phrase is, of course, a nod to value.

In practice, growth investors don’t normally behave like the GARP framework predicts they will. Instead of looking for, say, stocks with low prices versus their earnings growth rate, they instead buy stocks which have already made huge moves (Fear of Missing Out!), take stock tips from acquaintances at parties (and from brokers), and invest in the biggest “names” in the market instead of putting money in the undervalued performers.

A Growth Investor Car Buyer is most likely to end up with a vehicle which he or she knows lots of others are buying. That doesn’t mean a bad car, per se – but our growth pal just bought an Audi after driving a Lexus Rx in the mid-to-late 2000s and a Hummer H2 before that, preceded by a Jeep Wrangler. Toyota Priuses, mid-2000s Volswagen Beatles, and later-2000s Mini Coopers also entered the discussion when they were hot… along with whatever his or her cousins and friends were buying.

Fine cars, all – but at a reasonable price? That’s what separates the adherents from the pretenders, my friends!

The Value Investors


Where we’re going, we don’t need P/E ratios… (Wikipedia)

“Value Investor” is another label that people like to wear… yet fail to live up to. A pure value investor is most concerned with the margin of safety… a nebulous term which really means asking “what are the odds I get my money back… or make money on this?”. They concern themselves with dividend discount models and discounted cash flows.

All value investors love ratios and numbers pulled from company quarterly reports – the worst value investors invest directly on those numbers, while the better value types will concern themselves with history, trends, and, yes, Growth at a Reasonable Price. Good value investors care about esoteric things like 13F Filings and changes over time in company report footnotes. And they usually pay attention to company Q&A sessions.

Value Investor Car Buyers are, of course, the ones most likely to answer weird car-related questions like the one that lead this piece. They buy the car no one has heard of, or the used car from the nameplate that no longer exists or went through bankruptcy. They may buy cars just to be contrarian (think Subaru drivers or Audi-before-2008 drivers) or just buy cars that were an amazing deal (anyone who bought American cars during the financial crisis). They also love cars that go against the grain for a brand – sporty Turbo Volvo, anyone?

Value investors love used cars – combine it with another stereotype and you’ve found Value Driver Valhalla – think of a fallen hero like a DeLorean DMC-12, or a used classic like a Porsche 944.

Of course, if their car gets too popular, they’ll sell it.

We All Want Similar Things

We all want similar things from our investments, just like we all want similar things from our transportation. You can summarize the entire universe of investing and transportation goals as “getting from point A to point B”. Sure, passive investors and drivers demand efficiency in expense ratios and gas mileage, technical investors and drivers like speed and volatility, growth investors and divers want to own what others enjoy, and value investors and drivers want safety before speed. Hopefully that means everyone makes it to the same place without crashing or breaking down… even if the individual journeys differ wildly.

It’s time for you to comment now. Start with which investing camp you most closely align with, and tell us what you (and your significant other, if you have one) drive. Make sure to tell us where you agree and disagree with the comparisons – and feel free to take a shot at some of the rarer investor types (here’s a freebee – do Activist Investors!).

Happy investing!

FULL DISCLOSURE: I drive a SAAB 9-3, my wife drives a Jeep Liberty, and we have no plans to buy any cars mentioned in the article in the next 72 hours.


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Updated for 2016 and beyond

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. says

    With a 14 year old Land Rover, I guess I’m a Value Investor!

    I think Technical Investing is a bunch of bull if that is the main way someone invests. It usually means the person doesn’t know how to read financial statements or do their own modeling.

    GARP is really the best method IMO. I had a hard time paying up for growth in the past, but not so much anymore.

    • says

      There really isn’t enough Peter Lynch love in the Blogosphere. I’ll do my best to change that (I’m biased towards Boston anyway, it’s worth a shot).

      I agree on the technical investors point – downhill in a hurricane is the best way to put it.

  2. DSA says

    First time poster here…I’ve been lurking for a year or so. All of my investments are in low-cost broad index funds heavily weighted towards equities (40% S&P 500, 40% US small caps, 10% emerging markets & 10% bonds/cash). And as the article predicts, we own a 2006 Honda Odyssey with 140k miles and a 2008 Honda Fit with 78k miles, both bought new. Too many people, young and old, are long depreciating assets and short appreciating assets; these are the same people who don’t understand that the most expensive part of a depreciating asset like a car is the opportunity cost of not investing that money elsewhere. These are the same people who are woefully short of retirement funding and most likely will blame someone else for their failure to save. My guess is that these are also the same people who write you nasty emails about your 10% target automobile budget!

    On a side note Sam, I’m also a Wall Street i-banking alum (JP Morgan pre-Chase) from my post-college days. I have two Ivy League degrees and a high school diploma from an expensive, blue blood New England boarding school, so my guess is that we could have hours and hours of debate about the value of high-priced education…and I’m not even sure where I stand anymore! I got out of Wall Street after four years and haven’t missed it in the 15 years since.

    We’re 3/4 of the way to $1mm in net worth, so hopefully someday in the not too distant future we can dialogue about your new side gig @ Personal Capital.

    Love the blog – keep up the great work.

    • says

      Glad I lured you off the sidelines with this piece!

      I can totally respect the Honda choice for a passive investor – relatively cheap, easy to fix, lots of expertise out there.

      What’s the reasoning behind the 80% allocation to US stocks? I’ve been investing heavily on the international front lately, and would love some perspective on how you set that allocation.

    • Austin says

      I would be interested to know your perspective on value received between boarding, ivy undergrad and ivy grad. Assuming you could afford, would you provide boarding as an option for your children? If so, have you found it to be a tough sell to significant others who did not go to boarding school?

    • says

      Good to hear from a fellow Wall St alumni!

      Sounds like a lot of blue blood coursing through them veins. Andover or Exeter? You’ll have to share your educational path with us more one day.

      I thought about a Honda Fit for a while. Perfect city car. Not so much to Tahoe in snow. Check out the new Nissan Versa Note 2014 if you ever decide to switch. Not bad!

  3. says

    I guess I fit I to the value investor. I invest primarily in rental properties I can buy below market value. I am also a car nut.

    I have an 86 Porsche 928, 91 mustang convertible 5.0 with a supercharger and other go fast goodies. My daily driver is a 2010 Audi s4. The fast version of the a4. I bought that car sight unseen from Cali (I’m in co). Because it was cheap, had super low miles and a 100k mile warranty as a certified used car. My dream car is a Lamborghini Diablo.

    • says

      Lol, I was just thinking about that! My boyfriend has a big pension (union) and no investments, and a big company truck (Ford F-150). He has a couple of old “farm trucks” that he keeps around, but no other “daily driving” type vehicles. I can see a definite correlation there for him.

      I’m an index fund girl myself, and drive a Ford Escape.

  4. says

    We’ve been, but never bought. =(

    Though we’ve got a Mazda Miata now (admittedly my car and I tend to go for the ratio FUN/$ – previous car ’02 Mini Cooper sold when the denominator in that ratio got too high…), Mr PoP is definitely a car value investor at heart and never misses an opportunity to tell me how much the early 1990’s NSX has increased in value since he started making noises about wanting one a few years ago. His previous car before his Wrangler was the Benz here.
    A 1986, and boy was that clutch hellish to learn to drive a manual on.

    You really may have the Mr pegged car-wise. =)

    • says

      I think it would be annoying to keep it at 87 or under all the time!

      When it comes to a stick – learning on an old car means you can drive anything (especially those older cars with the heavy clutches). Learning on a new car likely means you can drive a newer manual.

      And learning on a diesel means nothing… I remember my buddy had an older Jetta TDI where you could just leave it in first while stopped and it wouldn’t stall. Hilarious.

  5. Adam says

    Hit the nail on the head for me. DIY/Passive index investor for the past 2 years. Couple of months ago, I traded in my 2005 Honda Accord DX for….a new 2014 Honda Accord. “Splurged” this time and got the “touring” edition. :)

  6. Jojo says

    Drive a Honda CRV, purchased it mainly due to the East Coast snow. I guess I am consider a passive inventor; 50% in stocks and 50% in mutual funds, only look at it quarterly. Would love to know which index funds are a good buy right now.

  7. nbsdmp says

    You come up with the best stuff Sam! I’m really not sure what I am…I think I’d be considered a value investor, but cars are my weakness…so maybe I’m an anomaly. I typically buy used cars, except for the car I run through my company…but I almost always opportunistically buy used with cash from a distressed buyer who needs to sell immediately. Currently there is a pristine example of a ’67 Vette that is for going to get ice cream on beautiful Sunday afternoons and the occasional car show, a Z06 for taking to the track and when you just want to drive something loud and fast, and a 911 Turbo S for well just because its really cool and fun to drive. The Yukon is the daily driver & pulls the summertime toys. Only after I was comfortable that I had far surpassed my # was I comfortable in these purchases though…for years I rolled in a Tahoe’s that I’d rack up a 200,000 miles on before replacing it. Still though, I don’t violate the basic % rules you discuss…I think they hold true regardless of where you are at in your FI journey. If you know what you are doing, it is not that crazy expensive to have a few nice rides…the only real cost is the opportunity cost of having the $ tied up in depreciating assets (the 67 actually appreciates).

  8. says

    I once tried to buy a Ferrari GTO. Given that one sold recently for over $50 million (highest price ever for a single car), that would have been a terrific investment.

    Problem was, buying one was expensive, even back then.

    But it was a sure thing, and sure things rarely come cheaply. Investing in something good, and paying a fair price, says Warren Buffett, is better than investing in something okay, but getting it at a good price. My wife and I drive two 4×4 vehicles. Not a GTO, but, in Denver that’s considered a sure thing. :)

  9. says

    Make/Model Year Miles Driven Years Paid
    VW Bug 1968 115,000 7 850 Used
    VW Jetta 1985 330,000 15 10,700 New
    Honda Accord 1992 135,000 8 5,500 Used
    VW Jetta 2007 85,000 7 19,080 New
    Totals 665,000 37 $36,130

    My auto history indicates my style as ‘Value Investor’, but today with 90% of my liquid NW in CDs I consider myself an ‘Ostrich Investor’.

    Motley Fool’s philosophy is that “you are not your car.” My brother wondered why I was driving a car with 330,000 miles on it, and the conversation went like this:
    Bro: “Why do you drive that beater? It looks like hell, Dude.”
    Me: “You know what, Bro? I am not my car.”
    Bro: “You know what, Dude? You are that car.”
    Me: –

    Point taken. Bro.

  10. JT says

    I’ll go with activist, because at this point, I’m pretty sure a sum of the parts valuation of my car vastly exceeds the whole at $1,200.

    If I get 3-4 more years out of it, I’ll take it to the car graveyard with a smile on my face.

    • says

      You’ve got the first part down, but I think to be considered an activist you need to loudly proclaim your car is undervalued and suggest to management to start parting it out.

  11. B says

    Fun post. I drive an old Lexus SUV because it gets me skiing on the weekends in ‘luxury’ but respectable for the work week. And I consider myself a value investor. But I think maybe there’s a difference between men and women, since generally speaking men care more about cars. Maybe a similar post on shoes would resonate more with women. :)

    • says

      Oh man, you’re setting me up to be skewered on the shoe piece.

      I might be able to do it justice on the men’s side (the world needs more Alden and Allen Edmonds love, sorry England/Italy!), but experience dictates I stay quiet on women’s footwear.

      Actually, I’d nominate you do to a shoe post on the site. Thoughts?

  12. says

    My investing style is definitely a mix between the passive investor and the value investor. But I’m not sure my car choices would line up with that. I drive an ’07 Mustang right now, but always have the urge to try and get myself into a bmw 335 or audi a4 :-/

  13. says

    I’d have to say I’m a mixture of Passive, Growth, and Value Investor. I primarily target stocks and the ranges that they trade in between (and often with dividend paying stocks to help sweeten the pot sometimes), but my Passive side is the 401k through work, since I only have a limited number of funds that I trade in/out of at times that I choose. My Growth aspect comes from events like my most recent stock RTN which I picked up back at $76.03/share because of contracts that they won and were continuing to win. I have backed out of the market rather largely (58% in) though because I feel that there will be another downturn of about 5%-8% by the end of the first quarter … that’s just a hunch though. Besides, the cash portion is sitting in investments that have averaged 3%+/yr for the past decade or more.
    Happy investing PK (and everyone else for that matter)! :-)

  14. Marvin says

    I’m a passive income & value investor. But when it comes to car I want the cheapest yet most reliable vehicle to get me from point A to point B! That is it, heck if I had the time or funds I would create a car that did just that.

    • says

      Embrace the scooter! 100+ miles per gallon!

      Actually, I’d take a page from the passive investor side and get something used and reliable, under 100k miles. Glad to see another passive/value investor commenting!

  15. says

    New or used? Off lease 335 or A4 I’d let you make the case for Growth at a Reasonable Price. On the 335 versus M3 decision, I’d probably go 335 as well. An M3 just seems like it’s asking to be stolen (Pump and dump analogy? I don’t know, someone get the rebound and make a better one).

  16. Tom says

    I’d have to be considered a passive investor, mostly because for the time being my savings in IRA (~11k) is not exactly something to worry over, especially since it has grown by about 17% in the last year and a half. This will hopefully change once my wife and I pay off our six figure student loan debt in the next two years.

    I dont have a car, only a beach cruiser to get to work (the perks of island living).

    • says

      Well, look at it this way – beach cruisers >> fixed gears.

      Nothing wrong with the passive investing style – take a look at some of the links I scattered above… even passive investing pays dividends (literally and figuratively).

  17. says

    It’s incredible how many options there are when it comes to buying a car. I don’t know if I’d ever have the stomach to pay up for a luxury car. But I am willing to pay a fair price for safety. An airbag and a good crumple zone saved my mom when she had a head on collision thankfully.

    Hopefully we never need to use airbags, but it’s good knowing that they’re there if something unexpected happens.

    • says

      Plus the safety innovations that are pioneered in the luxury cars (and, usually, on the racetrack) eventually make it down to the mid-market anyway. The history of car safety is fascinating – crash one of the hulking beasts from the 50s into a modern compact in a front offset (around 30 MPH each) and:

      The 50s car’s frame will survive and the 2010s car’s passengers will survive.

      Car safety innovations are amazing.

  18. says

    In terms of cars, I see myself as a value investor. Owning value (Honda & Toyota) cars probably is too easy! I tend to invest in index funds, (dividend, healthcare & biotech) stocks probably makes me a combination of value/growth investor.

  19. says

    Thank goodness I got value investor due to my sporty turbo volvo. It wasn’t the smartest purchase at the time, but with only 130k miles on it now, I’m expecting to get at least another 200k before I trade up and buy my dream car- ’91 Geo Metro w/ 51 MPG. Of course, with age I’ve come to realize cars aren’t more than transport from A to B. Not the status symbol I wanted in my youth.

    • says

      Is that one of the three cylinder ones? 51 MPG or so?

      Great machine, haha. Still, you’d be taking a hit on safety going from the Volvo.

  20. JD says

    Get a somewhat “classic” car that you can enjoy and is fun. The right car will continually rise in value every year you own it assuming you take reasonable care of it.

  21. says

    This is a great post. I honestly believe that investing is a direct reflection of our personality. So much of what we do in our real lives also reflects our money lives. I like to do things by myself and I prefer to choose my own investment strategy. Probably because I’m a financial planner but also because I don’t really want to sit and talk for an hour about my money with a stranger.

  22. Denise says

    Passive investor and driver camp. I have been driving the same Honda Civic my daddy bought me (new) in 2001… and plan to continue driving it until it becomes unsafe or unreliable. My SO drives a used 2008? Honda Accord, but he had his Lotus days. Glad those wild days are behind him now.

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