Why Not All Investors Get Rich?
They like to get rich without going through many years of discipline and patience. Process leads to outcome.
80% of Gains Come in 20% of Time
So an investor needs enormous patience and conviction to hold stocks or Mutual funds for 10 or 20 years.
Prices Change Frequently
Value change over a period of time. There lies the opportunity.
Compounding is Back Loaded
It works well only over a longer period of time. There is no substitute for time in compounding.
Sometimes Doing Nothing is Best
99% of the time, doing nothing is the best thing to do in the market. It is good to be a Rip Van Winkle investor. Activity hurts. Sit still.
You Cannot Predict or Control Markets
What you can control is how much you save, investment process and behaviour. Focus only on that.
Strange Investor Psyche
We see past bear markets as missed opportunities. However, thinking about future bear markets is gut wrenching.
Tiny drops of water make the mighty ocean. Invest for the long term. You can create huge wealth.
Investors are Human
That’s why markets would never be fully efficient.
Don’t Time the Market
Markets usually run ahead or fall behind. Rarely in equilibrium. Over or under valuation can last for long time.
Buying and Selling Is Easy
Holding on through ups and downs is difficult, but ultimately most rewarding.
- Not investing in equity is more risky than investing in it. Remember, you need to beat the inflation and retain your purchasing power.
- Random outcome doesn’t invalidate the need for a process. Sound process and consistently sticking to the same increases the chance of luck.
- If someone keeps reviewing the value of his house every day, we may suspect his mental health. But that’s what we keep doing with our equities.
- An inferior strategy you can stick with is likely to produce better results than a superior strategy you cannot stick with.
- Equity investments are subject to behaviour risks. Always keep a check on our emotions while investing.