Why you need a Long Term approach to Investing
In today’s world we don’t often take a long-term approach to life. Instant gratification, constant praise and fast results seem to be all we strive for. I believe, however, that we can learn a lot by some- times looking back. Not all the time of course; we want to always be learning and moving forward. But I believe in the value of patience and a long-term approach, particularly with investing.
A 986,028% RATE OF RETURN
Let me share with you a fantastic story that helps demonstrate the importance of taking a long-term approach before we get into more detail about where to invest your money to create financial freedom.
Like all young boys, Warren was full of energy. Early on at school he sold soft drinks and had a paper route. He saved this money. When he was 14 years old, he invested the earnings from these endeavours in 40 acres of land, which he then rented for a profit.
All through high school and university, Warren had an interest in investing. He read books on it, listened to people involved in and around money, and through a combination of living within his means and applying his knowledge, he started to build on his investments.
In his late twenties he started his own business. By 30 years old he was already a millionaire because he put his money to work for him. He later purchased Berkshire Hathaway, a dying textile mill. Cash flows from the textile business were used to fund other invest- ments.
By now you might know the name of the person in this story. Yes, it’s Warren Buffett, the world’s leading investor, multi- billionaire, and a great philanthropist.
While Buffett’s story is amazing and difficult to emulate (due to his genius), there are lessons you can learn about how to create financial freedom using your business.
Buffett’s investment philosophy became one based on the principle of acquiring shares in companies that he believes are well- managed, undervalued companies. When he makes a purchase, his intention is to hold the asset indefinitely. He uses the cash flow that these assets generate to invest in further assets. He takes a long- term approach to all his investment decisions. In fact, he still owns shares in companies he purchased over 50 years ago.
To demonstrate the value of long-term investing, let’s use an example of buying shares in Warren Buffett’s company, Berkshire Hathaway.
If you had invested $1,000 in these shares at the $19 price per share during Buffett’s purchase of Berkshire Hathaway in 1964, you would have owned 52 shares. At the closing price of shares of $189,640 on 26 January 2016, your 52 shares would have been worth $9,861,280, providing a theoretical 986,028% rate of return over a 52-year period.
Not bad. Not bad at all.
PROPERTY OR SHARES?
There is a lot of noise and endless amounts written about where to invest your money. Should you buy shares? What about prop- erty? I’m here to tell you, you should be investing in both, and the most important lesson from Warren Buffett is to take a long-term approach. In part II, Your Financial Freedom Gap, we looked at creating enough assets to produce income to allow you to become financially free. Shares (in public companies) and property (invest- ment properties) are both assets that produce income.
The benefits of buying shares
The companies that you invest in through purchasing shares will hopefully make a profit (if you invest in good, solid companies). A portion of these profits will then be paid out to you as a share- holder in the form of dividends.
Taking a long-term approach, you may have the option to ‘reinvest’ these profits back into the company by buying more shares. In essence, you are using the profit the company makes (a good thing) to buy more shares in a profitable company (a good thing), and when the value of the company increases (a good thing) so does the value of your asset (a good thing). What’s not to like? Sure there will be fluctuations in the value of your shares, but if you buy good companies, take a long-term approach and reinvest to increase your holdings, you can begin to grow your assets.
The benefits of buying property
If you purchase a residential property (a property that someone lives in), it will pay you rent. Alternatively, you could buy a com- mercial property (that a business operates from), and you will also receive rent. The difference here, compared to shares, is that you cannot use that rent to purchase a small portion of another invest- ment property, because property cannot be purchased in small amounts like shares can. You can purchase shares with as little as a few hundred dollars to get you started. With property, however, you need a few hundred thousand to get going. This means, most of the time, you will need a loan to buy property as you won’t have the funds yourself.
While shares and property have different characteristics, the most important suggestion I can give is to take a long-term approach to investing with both. If you do this, focus on why you are invest- ing (to create financial freedom), start with the end in mind, know your Financial Freedom Number, and invest well, you will be suc- cessful.
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There is another asset that forces you to take a long-term approach to investing. However, it often gets a bad wrap, especially with entrepreneurs. Just the name is something that makes many small business owners cringe. But I am here to change all that. I am going to make you love what you can do with this asset. The asset is called superannuation. I’m going to show you why as an entrepreneur you should care about superannuation.
Don’t believe me? Check out tomorrow’s article

THE BOOK
Check out my new book, Freedom Assets: The Entrepreneurs Roadmap to Financial Freedom. It outlines the 3 Step process to creating your ideal life, freedom and time that allow you to have an impact on your community and creating a lasting legacy.
You can pre-order your copy now here
