The #1 Reason People Fail at Investing

We’ve all seen movies like The Wolf of Wall Street and The Big Short, and we’ve all wondered the same thing; is the world of investing really like that? I’m not talking about selling people garbage penny stocks or repackaging CDOs, I’m talking about the quick paced environment these films use to portray Wall Street. It just seems like these guys and girls are making huge sums of money practically overnight.

Hopefully everyone reading this realizes that investing is for the long haul. Investing is not about finding quick ways to get rich, it’s about finding safe ways to consistently grow your money. But it’s natural to wonder if you can get wealthy from investing overnight.

The answer is no. It is very unlikely that anyone will get rich overnight by investing in stocks. The market just isn’t built to make instant millionaires. Although we’d all like to get rich quick, we can use patient investing strategies to take advantage of the speculators in the market.

Benjamin Graham, a renowned investor and mentor to Warren Buffett, says in his book The Intelligent Investor, “an investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” Graham’s message is that riding the market’s momentum and following quick trends is not really investing, it’s speculating and gambling on an economic market that is almost impossible to predict.

Now you may be thinking that stockbrokers and analysts are trained to know what the market will do, and they are educated to do just that. The truth is that no amount of education ensures that you can predict the day to day fluctuations of the market. There are too many people making trades on a daily basis to come up with an exact formula. If analysts and brokers knew what the market would do next, the investing world would be very different.

When I first started investing, I realized that investing is long term. If any of you have ever looked at the hourly changes in stock prices, you would have noticed that for the most part the prices do not change all that drastically. If you go to Yahoo Finance and search a company you like, for example Apple or McDonalds, you could look at their growth graph and see that it’s taken years for these companies to increase in value. No one can expect to get a huge return on their investment the day, or even month, after buying stocks.

Sure there are instances where the price of a share of stock for a company changes drastically in a single day, but those instances are not the norm.

The classic example of investing long term is the Oracle of Omaha, Warren Buffett. Buffett doesn’t day trade, he looks for value and invests for the long haul. Once we buy into the idea of investing long term, finding quality investments becomes easier. There are around 4,000 publicly traded stocks on the market, many of which are not great investments. By investing for the future, you narrow you search to the few hundred stocks that can build you wealth.

Don’t play a game the trained “experts” can’t even win. As we move forward, hopefully we can discover strategies to, if not beat, match the market and build long term wealth for ourselves and our families.

Signing off,

The Stock Jock

I am not a professional investor and do not offer professional advice. This is simply my opinion and effort to share information with other investors.

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