The Most Important Investment Lesson You Should Have Learned From the Movie, The Wolf of Wall Street

Posted by Fitz Villafuerte under Investing on January 31, 2014

The Wolf of Wall Street is a film based on a book of the same title, and is about the life and times of former stockbroker, convicted criminal and now, author and motivational speaker, Jordan Belfort.

In case you haven’t seen the movie… yes, you read that right.

Jordan Belfort was a stockbroker, who got convicted of fraud crimes related to stock market manipulation, among others. And then, after serving his sentence, went on to become a sales trainer and motivational speaker.

Quite a life, right?

The Wolf of Wall Street is currently nominated for Best Picture in the Academy Awards, and could finally give Leonardo DiCaprio (who played Jordan Belfort) the Best Actor in a Leading Role win at the Oscars.

I watched the film last night, and I’d like to talk about a scene in the movie that really struck me because it implicitly taught the audience an important lesson about investing.

What was this scene?

It occurred when Jordan Belfort was in a restaurant with Mark Hanna (played by Matthew Mcconaughey), who was his boss at his first job in the stock brokerage firm, LF Rothschild.

All of my friends, and probably most of those who watched The Wolf of Wall Street, could only remember the “Money Chant” from that scene:

The most important investment lesson you should have learned from the movie happened during their conversation before the scene above – when Hanna told Belfort the secret to becoming rich as a stockbroker.

Let’s Pretend I’m Your Stockbroker

I’m your stockbroker, you’re my client. Customarily, part of my job would be to give you advice when and what stocks to buy, and when to sell those shares.

Last January 2013, I told you to buy P100,000 worth of Jollibee (JFC) at P110 per share, which you did.

By February 2013, I told you to sell JFC at P130, which you followed. Your account is now at roughly P118,000.

JFC shares went down to P115 in March and I told you to buy, then by May, I told you to sell them when prices reached P135.

At this point, your P118,000 is now around P138,000.

Market dips by June, and as per my advise, you bought JFC at P125 per share. Then I told you to sell them in August, at the peak of P175 per share.

From the original P100,000 – your account is now currently at P193,000.

The question now is, what would you do?

a. Keep the money in the account, and continue following the advise of your awesome stockbroker

b. Withdraw the P93,000 but retain the P100,000 and continue following the advise of your awesome stockbroker

c. Withdraw all the P193,000 and close your account

Most people would choose “a” and let the earnings compound. The more conservative ones will choose “b” and protect part of their earnings.


However, I have yet to meet a person who would choose “c” – the third option.

I believe the person who would choose to withdraw all their money and close their account is either crazy or one very smart investor – and here’s why.

Keep The Clients on the Ferris Wheel

Let’s go back to the restaurant scene and watch the slightly longer clip below.

Revolutions… that’s the name of the game.

From January until August 2013, how much money from the stock market have you “physically” put inside your pocket?

The answer is zero, because your money was just all in your stock market account.

Meanwhile, from the same length of time, as your stockbroker, I have earned around P10,000 commission from the brokerage fees which you paid from both buying and selling JFC shares.

And this was Hanna’s advise to Belfort – to keep the clients on the ferris wheel – so he could continuously earn from commissions while his clients remain happy just seeing the paper gains in their accounts.

Paper gains which their clients could neither touch nor spend anywhere else.

The Most Important Investment Lesson

First of all… no, your stockbroker is not evil. He or she is actually one of the best people to ask about stock market advice.

What a lot of people miss out on when investing in the stock market, or in mutual funds, or UITFs or in everywhere else is having an investment objective.

Have a goal before you invest.

The reason why you invest is to be able to afford your dreams, so before investing – you should first define your goals.

What do you want to buy? Where do you plan to spend the money on?

Answer these questions and it will make all the difference.

If you’re investing because you want to have P500,000 as capital for a grocery store business, then choose “a” – keep the money in the account, and continue following the advise of your awesome stockbroker until its value reaches half a million – then you withdraw.

If your goal was to save P250,000 for your child’s college education, then you can choose “b” – withdraw the P93,000 and put it in a time deposit. When your remaining P100,000 grows into P157,000 – then it’s time to get it.

If your dream is to travel around Southeast Asia on a P190,000 budget, then withdraw the money, pack your bags, board a plane and use the excess P3,000 to buy pasalubong for your awesome stockbroker. ๐Ÿ˜€

Remember… don’t get stuck in the ferris wheel.

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7 Responses to “The Most Important Investment Lesson You Should Have Learned From the Movie, The Wolf of Wall Street”

  1. Dennis says:

    I think that illegal practice is called churning. I love the movie btw

  2. blanca says:

    At first I was hesitant to visit this site..but when I read the blog I think there’s no harm if I try to be a part of this..thanks to the movie the Wolf of the Wallstreet..which made me realize that I need to find ways on how I can earn more..I am really struggling on how can I earn enough for my family needs and my salary is not enough for them..

  3. gabe barrios says:

    One thing I can’t forget about the movie is that stockbrokers start amassing fortunes the moment you believe what THEY say,then your money and you…still in a limbo.It’s stockmarket..nobody can predict it’s going to be ‘UP’or ‘DOWN’.

  4. ina says:

    Thank’s for all the info’s..what if i’m going to use it for my retirement? Where should i put it? I started to join the mutual fund year 2006 but it’s just a very minimal amount,the reason why i joined was out of curiosity but the truth is i don’t understand it much..Thank u!

  5. Louis says:

    Great post Fitz. Yes it is all up to you, the investor, what you really wanted to get in return for your money. Brokers become bad when they don’t think of their clients when they do their job. So the best I guess is to work well with your broker(and do your own leg work or due diligence before putting that hard earned money). Make a win-win situation for the both of you… stay focus on your goal and tame your greed.

  6. Jill says:

    This was quite timely. I’ve been wondering how I’ll deal with my paper gains/losses, and Fitz just cleared everything for me.

  7. Sherwin says:

    WoW! ang galing mo sir Fitch! ๐Ÿ™‚
    u broke, brokers strategy…
    really ur the man!
    God bless u more sir Fitch.

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