There are lots of things in life that are difficult. Becoming wealthy is not one of them. At least not in year 2019 and if living in the US. There are numerous opportunities to make a great deal of cash and create a significant amount of wealth.
I view this as an opportunity to invest in great businesses and reduced prices. Most news reports will describe panicked investors, but why? Why should the ability to buy something at a reduced price cause consternation and anxiety. This would only occur when an investor doesn’t clearly understand the economic value of what he or she has bought. Most investors can only see price, and use this as a proxy for how much something is worth. A dropping price means that asset has dropped in value. This just cant be. The tail doesn’t wag the dog.
Most investors and business people would be well served to keep things as simple as possible. Why make things difficult. As I mentioned above, becoming wealthy isn’t difficult, its just that most people in business make things much more complicated and therefore risky than they need to be. Just because one thing is more complex than another thing, doesn’t mean its necessarily better.
In order to keep things simple, a few guidelines are in order.
Understand the value of your investment. You must–on your own, be able to determine how much something (ie an asset, property or business) is worth. If you cant do that, you’ll always be at the mercy of changes in stock prices. You’ll be no better off than talking heads that make up most financial news outlets.
Invest in things that are of high quality. You’re most likely to do well over the long term if you stick with high quality things (and high quality people, but that for another time).
Invest in things that are likely to increase in value at a reasonable rate over long periods of time.
Don’t over spend, ie. don’t pay more for something than its worth. The cheaper the price the better. Your returns increase as the price you pay decreases.
Have patience. Let this high quality asset, that is appreciating in value work its magic for you over time.
This is really all most investors need to do to accumulate a great deal of wealth.
As an example $10,000 invested in high quality businesses, with additional investments of $10,000 made annually ($833/month) over a 30 year period, with that investment compounding at an average rate of 8% annually results in a future value of nearly $1.2 million. You can play with numbers using any Compound Interest Calculator, and come up with varying future values. The point is, considerable wealth is within reach for much of the investing public.
Lastly, if any of the above seems over your head or beyond your ability, just find a simple index fund and stuff as much money you can muster into the fund for as long as you can. It’s really just that simple.
Unfortunately, it’s unlikely that most people are going to following any of the simple steps outlined above. Simple isn’t sexy. And it doesn’t make headlines.