There is a famous quote from Warren Buffet, which according to the wide-spread story has been initiated by Jeff Bezos, the CEO of Amazon.
During a conversation and being a long time friend of his, he said: “you are the second richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?” To which Warren Buffets responded: “because no one wants to get rich slowly”.
This statement couldn’t be truer.
As I mentioned a few times in earlier posts, investors are a rare breed. Too many people lack financial education and in even more cases, the spectacular rise or fall of companies give people the overall impression, that investments are more or less just another method of gambling.
This could not be further away from the truth.
It is true that even the biggest giants can tumble. Just look at what happened to General Electric or Deutsche Bank. Or Wells Fargo. Or… the list is long. But this is why diversification is such a strong factor in setting up investments and this is also why Warren Buffet recommends investing with Index ETFs – which are the simplest way of accessing the market and building wealth in the long run.
But to give a little more perspective on individual companies, first and foremost we need to realize and always remember, that companies are people. At the end of the day, behind every company name, every brand and every stock is a smaller or bigger group of owners, managers and employees who got the courage, the idea and the willingness to create and sell a product or a service on a scale large enough to go public.
One should never forget, that going public is a serious matter, restricted through plenty of regulations and secured throughout several processes to minimize the risk of fraud and at the same time having a business model in place that is convincing and promising enough to grant the entrance on the floor of the stock exchange. And not only entering the stock exchange is serious, remaining there is almost as hard as getting in. The requirements on financial disclosures, presentations and constant valuation of every business move and every larger business decision put the companies under a never-ending reporting stress that requires disclosures beyond the imagination of any small-business owner.
I am not saying that it’s impossible to cheat here, but I am saying that there are checks in place that allow reflecting, analyzing and evaluation of any listed business in a very detailed manner, thus putting the odds much stronger in favor of a potential investor.
This odds are even more strongly represented by the duration of rising and falling markets, for which I would like to refer to a graphic from a Business Insider article I was reading recently:
One can be scared of investing money, but odds, reason, and history give a very clear recommendation. If you have time on your side, it is never wrong to start investing. However, and this is also very true, you have to be patient, consistent and truly understand that while ups and downs are part of any investors story, it is the long-term dedication that will produce results.
There is no magic bullet. No quick-get-rich-scheme. Just patience, logic and statistics. Start following it whenever you can, as soon as you can and get used doing it on a constant and regular basis – and great things will happen. Statistically.