“The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffett
I’ve read and heard a great deal of investment advice in over 15 years of investing. Some of it has been useful and some of it not so useful. However, there’s one single piece of advice that has really stuck with me, and which I believe is the key to generating long-term wealth from the stock market.
That advice is: invest as if you were already wealthy.
Invest like the rich do
What does that mean? Allow me to explain.
Novice investors – those looking to build wealth from the stock market, often believe that they have to be fully invested in order to maximise the return potential from the market. They focus on the reward side of the equation, and make the assumption that having 100% of their capital invested will generate a higher return than having 75% invested. However, this is not always the case. Sometimes, there simply won’t be many attractive investment opportunities available. It’s a mistake to invest just for the sake of it.
In contrast, the wealthy investor can approach the investing game with a completely different mindset. This investor has already generated their wealth, and therefore has no need to build it further. Instead, it’s largely about maintaining that wealth. As a result, they focus on the risk side of the equation, being very selective about the opportunities they pursue, and only picking out the investment opportunities that look really attractive.
By adopting this selective mindset, and only investing in what appear to be the most attractive opportunities, I believe it can make a huge difference to an investor’s long-term returns. It’s not always easy to invest like this, especially when the market is rising, and at times, significant patience is required. However, by waiting for an attractive entry point on that stock you’ve wanted to own for two years, instead of buying at a high valuation, it can make a significant difference to your long-term returns.
Wait until a great opportunity presents itself
The key here is patience.
During bull markets, attractive investment opportunities can be sparse. However, when recessions arise or market volatility spikes, attractive opportunities can come in waves.
That’s the time to strike, if you want to be a really successful long-term investor.
This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.