My daughter has an investment account that she funds with the money she earns. We talk about investments but I leave the investing to her.
I want her to learn on her own. I want her to make mistakes. I want her to try every little get rich quick scheme under the sun.
And I want her to fail. There is no better teacher than failure.
There are certain things that cannot be adequately explained to a rookie either by words or pictures. Nor can any description that I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.
Fred Schwed
Nobody wants to see their kids fail. But I rather they fail in their twenties than in their fifties. Failures later in life are expensive.
The allure of easy money though will always be there. It is made doubly worse with all those brokerage and betting apps we carry on our phones. Combine that with greed and envy and now you’ve got a potent mix that can lay waste to the best of plans.
Nothing so undermines your financial judgement as the sight of your neighbor getting rich.
J.P. Morgan
You fail at investing when you treat investing as if you are in a casino. The price of a stock today reflects everything about that stock’s past and the future. The only way you make more money buying the stock is when the business behind that stock does better than what’s already priced in.
And for a business to do better than what’s already priced in, it has to invest back into its business. It has to build factories, it has to invest in R&D, it has to expand services. And it has to do all that more profitably than what’s already expected.
But factories don’t start churning profits overnight. R&D investments take years to bear fruits.
Jeff Bezos once said this during Amazon’s earnings call…
When somebody…congratulates Amazon on a good quarter…I say thank you. But what I’m thinking to myself is…those quarterly results were actually pretty much fully baked about 3 years ago. Today I’m working on a quarter that is going to happen in 2020. Not next quarter. Next quarter for all practical purposes is done already and it has probably been done for a couple of years.
Jeff Bezos, 2017
So buying a stock today and selling it in a month or in a year is plain stupid. You’ll never get rich.
I don’t carry any investing apps on my phone. I don’t check on my money often, if at all. I don’t see a need to.
Because I know it is a long game. It is by design a long game. Your financial plans require it to be a long game.
Real money is not made in exchanging pieces of paper with Goldman Sachs. Real money is made in the holding. Real money is made with business ownership. Real money is made in building the conviction to double down when the market presents that ownership at a discount.
The real money in investment will have to be made – as most of it has been in the past – not out of buying and selling but of owning and holding securities, receiving interest and dividends and increases in value.
Benjamin Graham
Investing should be boring, as boring as watching paint dry. The more fun you make it, the more you’ll lose.
I’ll leave you with this little snippet from a fireside chat that took place sometime in 2013 between Jeff Bezos, Warren Buffett and Brian Chesky, the founder of AirBnB.
Chesky to Bezos: “Jeff, what’s the best advice Warren Buffett ever gave you?”
Bezos: “[I asked Warren,] your investment thesis is so simple…you’re the second richest guy in the world, and it’s so simple. Why doesn’t everyone just copy you?”
Buffett: “Because nobody wants to get rich slow.”
Nobody wants to wait from year 1 to year 10 to see the wealth snowball build from year 11 on as it gets bigger and bigger with no help from you.
Nobody wants to get rich slow and hence many never get rich.
Thank you for your time.
Cover image credit – Jeswin Thomas, Pexel