There’s a lot of what otherwise would appear to be ‘high level’ conversation nowadays on what it actually takes to build wealth. The leading discussion point is that it’s all about investment strategy and being able to pick winners and losers in the stock market.
Unfortunately, this strategy ultimately cheats the individual wealth builder out of possessing their most important wealth building tools; time, wealth building discipline and the unnecessary…yup I did say unnecessary…need to be able to pick winning stocks.
Conventional Wisdom isn’t Conventional and it isn’t Wisdom either
Conventional ‘wisdom’…really new wave hyperbole that is meant to come across as wisdom, no doubt…is that the only way anyone can build wealth is that they need to be able to consistently nail ‘ten baggers’ in the stock market and that as long as you can do this, you have plenty of time before you have to get serious about investing.
In fact, no need to worry about retirement in your 20’s, 30’s or even 40‘s. You’ll have PLENTY of time to ‘catch up’ later on when you learn how to pick all those winners that you’re going to pick.
The harsh truth is that this approach doesn’t make sense for anyone that is serious about creating wealth. In fact, let me address this from a rational approach. First, let’s talk about Time.
Time. The most important aspect of building wealth
If I had to think of THE most important aspect of wealth building I’d have to say without a doubt it has to be Time. The primary reason for this is that you have…well…time to make mistakes.
When you have Time you don’t necessarily have to be right every instance as it relates to the individual aspects of investments, call it equities or stocks, as long as you are generally correct as to which direction the market is going in…whether that’s in stocks, real estate or whatever market that you’re in.
This sounds counterintuitive to what most people are subjected to hearing nowadays because being right is always held in the highest regard as being the only thing of importance and of course, they have the magic recipe for success.
However, with a lot of Time ‘in the market’ you don’t have to be right every time and in fact, you can even tolerate some mistakes and unfavorable market movements along the way. The additional aspect of Time…and one of my other favorite features about it…is that it allows wealth builders to be able to invest less money at frequent investment intervals.
THIS is what ultimately puts wealth building in EVERYONE’s hands, as everyone has Time…IF they start building wealth as soon as possible.
Smart ways to build wealth
The other thing that the new ‘conventional wisdom’ about wealth does, because of its message that you have all the time in the world so you can start later in life, is that it denies wealth builders the ability of creating the level of discipline that is needed in order to be successful.
The kind of discipline that is needed is the kind where you begin investing at the earliest age possible and you do so consistently on a monthly basis.
And as importantly, this discipline sets the wealth building mindset in place whereby you choose to invest a significant amount of your income and you abide by the principle of living below your means by creating a gap between what you make and what you spend and investing the difference.
This type of discipline started early, practiced consistently and over a long period of time IS what builds wealth.
In fact, it is by far the most probable strategy available with the highest percentage for success because it doesn’t rely on luck or having to be right a vast majority of the time.
In contrast, it just requires that you start as early as possible, stay committed to the plan and invest as high a percentage of your income as possible.
Having to be right all the time is not a strategy
Now let’s talk about the conventional thought of having to pick the right stocks or individual investments in order to build wealth. What’s interesting about this approach is that it requires an individual to not only have to pick the right game, such as technology, pharma, software, etc. but it also requires the individual to have to pick the right company within the right game.
This sounds like a ‘a lot’ of having to get things right in order to be successful. Hum…isn’t that the same thing as what luck is? Yeah, I think so.
If you choose the wealth building approach of simply being in a market that is going the right direction…now here’s the beauty of this…you would have otherwise only had to be right on the general direction of where that market was going.
Over a long period of time going in the right direction, there’s going to be a high probability that you’ll be successful.
The other part about this is that you didn’t have to have special knowledge or even a particular background.
In fact, you didn’t even have to know one thing…not ONE thing…about investing. You just needed to have some level of confidence that the equity market would go up over a long period of time.
Bet on the racetrack. Not on the horses
Although my father had absolutely no background in the financial or real estate markets, one of his favorite sayings was “don’t bet on the horses, bet on the race track”.
I never understood it when I was young but I certainly got it when I got older.
When you own the market you don’t have to be right as to what the individual players end up doing as long as the overall ‘game’ wins.
If this is SO easy, why doesn’t everyone build wealth? Simple. The real template of building wealth as described herein takes time. A LOT of time. It’s also not a glamorous ‘get rich’ scheme that’s the latest and greatest fade. No.
In fact, it’s downright boring. It’s boring because it requires someone to do the same exact thing day in, day out…month in and month out…and year in and year out for at least a decade. Sometimes a lot more.
The hard thing becomes the easy thing…the easy thing becomes the hard thing
Just like in life, you have a choice. Put off now what appears to be hard…developing the discipline to invest now in smaller amounts and be committed to do this over a long period of time…or take what appears to be the easy road of waiting much later to invest…which in truth compounds the complexity and difficulty of that plan actually being ‘right’ at the point in your life when you HAVE to get it right because you’ve run out of time?
Doesn’t sound like much of a choice to me.
