There’s this idea in pop culture that investing is all sorts of things like:
• Highly risky
• Requires deep subject matter knowledge
• Highly speculative
• Only accessible to the wealthy
• Time consuming
None of those things are true. That myth largely revolves around speculative short term trading, not investing. I think we’ve all seen images in movies of Wall Street traders on the floor of the stock exchange frantically waving little pieces of paper and shouting “buy!” and “sell!”. That’s not investing, it’s trading or gambling.
Investing is when you buy an asset and hold it for a long period of time. That asset produces income and goes up in value. That’s how rich people get rich. Long term, buy-and-hold investing. When you’re a real, long-term investor you don’t have to worry about any of the following:
• What’s the next hot stock?
• Is a crash coming?
• When do I jump into the market?
• When do I jump out of the market?
• Is inflation going to ramp up?
• What if the feds raise the rates?
• Are the tech giants too big?
All of those concerns are for short term speculators to worry about. Long-term investors can sleep easy knowing that their assets are generating income and going up in value over the long term.
And don’t mistake this calm attitude for it being an inferior strategy. Quite the opposite. Long term investing is like setting a ship asail with the known tradewinds sure to make optimal progress over time, while the speculative traders are still just off shore splashing in the breaking waves.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.