I Just Learned That The Best Advice About Investing Is The Advice That Has Nothing to Do With Money
Take these pills and avoid reaping drama and regret later on
The conditions for building wealth are not so bad.
We have low unemployment. We have rising wages. Our capitalist system supports productive capital (stocks, private companies, investment property). The rich and the entrepreneurs understand this.
They use the system to their advantage. They invest their money. You accumulate passive income. You earn money while you sleep. In the true sense of the word.
The 9 to 5 employees rarely use it. They avoid the stock market. They are afraid of stocks and business ideas.
Here is what I have been doing lately:
Fish where the fish are
Charlie Munger once said:
The two rules of fishing are to fish where the fish are and to remember the first rule.
The same goes for investing.
In some places, no matter how good a fisherman you are, you will not succeed.
Life is a long-term game. Accept it as it is and do the best you can, and if you live to old age, you will have your sea of opportunities, you may only have two, but take one of the two, and you will be fine.
Give yourself plenty of time
Time is arguably the most important element of the compound interest formula.
If you only have 6 years to multiply your money by 10, you will need a 40% annual return to do so.
If you have 8 years, you will still need a 30% annual return. But if you are 17 years old, a 15% rate will suffice.
Simply put, if you have a 20-year horizon to achieve your major financial goals, why rush? And why take excessive risks in search of returns equal to Warren Buffett’s?
Go against the crowd
The wisest investments are about going against the crowd.
This includes dealing with constant criticism and provocation.
It would help if you stayed away from the noise in order to think clearly.
At times like being a loner, you need to have a strong stomach to keep playing without being bothered by what others want and ask you to do.
You may have the common sense to know what is good and bad for you. But it is your stomach that leads you to act on your conviction.
Zoom out
Most of the time, in life and in investments, zooming out is better than zooming in.
Instead of observing our own lives and instead of zooming in and, worrying about the daily volatility of the stock market, it is better to see our lives and our investments as weak spots that are just specks on the canvas of the world.
In that sense, if we continue to do our job well, our daily movements and volatility should not worry us.
Look at things over the horizon of eternity
It may not help us eliminate all the mistakes we can make as investors, but it can give us the tool to treat our investments and portfolios better.
Get comfortable with uncertainty
We will be better and happier if we start by recognizing that we will never be sure of the future.
It changes your task from trying to get it right every time. Calibrate your beliefs to get closer, little by little, to a more accurate and objective representation of the world.
Never forget these three powerful rules
Most good decisions in life are marked by peace, detachment, and acceptance.
The rise of the markets can cause us to ignore this.
Most investors like to believe that they can enjoy gains in the stock market without incurring losses. And this denial is what causes them stress and conflict.
They are disappointed when the harsh reality does not match their optimistic expectations. And then these investors feel powerless, which amplifies their disappointment even further.
After all, most events that happen on the stock market are beyond our control. We cannot stop the market from crashing and collapsing, nor can we call the companies, the stock market regulator, or the central bank when our stocks fall.
Don’t ignore this doubt
When you start with an investment hypothesis, your task is not to find evidence to confirm it but to make sure there is no reasonable doubt in your mind before you pull the trigger.
To ignore reasonable doubt is to be dishonest about a rational assessment.
Making and losing money is the very nature of investing, and is often beyond our control. So, just do your job well, then let it go. Yes, let it be.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.