Ann Zuraw Featured Contributor – SheOwnsIt
It all started with a gift from my children last year gifting me a subscription to:
Rent the Runway!
For those of you unfamiliar with this service, it is a subscription fashion service that allows women to rent designer styles for everyday and special occasions. There are different subscriptions to choose from, and I’ve been using mine for months.
I view my $160 Monthly investment in Rent The Runway Unlimited (RTR) as an approach to investing. The monthly subscription allows me to Spread out the risks. Instead of buying one dress for $160 a month; I get four different dresses (outfits) at a time for a cost $40 each. I usually have two coming and going (since I live in Greensboro, NC…I am jealous of New Yorkers changing dresses daily).
The subscription approach is similar to investing where you add to your investment every month (known as dollar-cost averaging). For example, through your retirement plan at work, every month, you add to your mutual fund investments. I am not making one big purchase of a dress or suit at once or buying an entire position at one time. (This is coming from someone who has wasted a lot of money on poor choices of clothes. Or if you decided to invest your money just before the market went into a downward correction.)
My major rent decision seems to be based on the retail price of the dress. I always select the most expensive ones. My RTR filter is for above $400—and I feel happy when I find a $1000 plus one. This is in sharp contrast to investing where you want a low price to earnings ratio. With my RTR dresses—I want it to be $1000/40=25 multiple, not $200/40 = 5 multiple.
My Advice to you
Why do I focus so much on the higher price for RTR? I am letting RTR decide what is valuable just like the market does. Are the designer brands, higher-priced viewed by consumers as being better? Am I letting the higher price dictate my own, and is this the best definition of value? When investing, the goal is to invest in a company stock, which is undervalued—or the price is low relative to its earnings—but the earnings are estimated to do better than expected. The market may be currently undervaluing the company because it has not shown its true earnings potential. Then when the earnings do better than expected, the market value improves—or your investment gains.
Just like buying an up and coming IPO—am I just falling for the latest trend? Am I really looking any better in my expensive RTR dress? Probably not, but it also is not just about the dollar value. Just like in your financial life—sometimes a decision may be a definite no based on the numbers but for your mental health—it is worth the investment. I convince myself that I look better in the $1000 dress that I am wearing—even if RTR sells it in 6 months for $69. I prefer investing in the market—where over time, the investment has the opportunity to grow in value and not decline assuming there was an accurate assessment of the earnings.
I encourage you to look at your retirement account as a monthly subscription service to build assets for your future.