Learning from other successful investors should improve your odds compared to the odds of winning it big in the lottery. Most often you need to save in order to have investment capital; that is why living below your means is so important to reduce the odds for getting rich. However, there are other ways of becoming rich without having lots of savings. Like buying real estate with nothing down! But that requires a lot of sweat capital and door ringing to get access to other people’s money. Many people get rich by starting their own business and working at it for years, provided they don’t go broke within the first five years. You can also get rich by saving a significant portion of your employment salary, especially when you’re apt at finding employment in successful businesses where you earn a small stake of the company(e.g. company savings plans). You can get rich through angel investing, investing in art or collectibles or by investing in gold or in your brother-in-law’s business or through joint-ventures. The roads to richness are numerous. You can even get rich by investing your savings in paper securities like stocks and bonds but that also takes a lot of thinking and sweating on your side. The odds of becoming rich through investing in paper securities are O.K. (much better than that of winning the lottery), provided you don’t drown in the morass of guru noise.
Greece, China are examples of noise lately. Also, BNN is noisy with every day at least 2 investment gurus telling often opposing views about how to invest your money over the long term or just about what to do right now. Oh and then there are numerous blogs and advisories (like this one) that tell you what to do. Reality is that the buck stops with you and that even when you do the right thing, whatever that may be, you won’t become rich overnight and you’ll quickly find out that the world of investing is akin climbing a slippery slope with three steps forward and two or sometimes four steps back.
I would say that living below your means, saving and tenacity are key ingredients for many successful investors. It is important to understand the value of money (i.e. what can it do for you and even more so, what money cannot do for you). When reading about investment advice, realize that it depends on the point of view of the adviser which is not necessarily yours. People seem to think that I am smart, why else read my blog? But really, I must be very dumb because it has taken me close to a live time to learn about investment strategies and about applying them. To be even more honest, I must be incredible stupid, because I still haven’t figured out what the holy grail of investing is, let be that I found it!
I guess, that each of us has to figure out what works for us. By reading a lot about investment you may recognize a strategy that fits your bill. Are you a value investor or are you technical (I call that trend follower) are you a momentum investor? Are you a trader, a speculator or a Warren Buffett kind of guy? Are you a couch potato investor? Are you a real estate guy or a stock market type (these styles often seem to be mutual exclusive – I must be the exception)? So, your investment style begins with you; you have to first of all know about yourself. What you invest in may be based on what you like to do as a hobby – play with your computer, socialize, visit factories, visit art galleries or being a handy-man. Next you study the various investment strategies and select one that fits best with you. Then stick to that strategy for a number of years ( 5 years minimum). Some people think in decades others in months. Also, your circumstances in life change and with that don’t be afraid to change your strategies. There is, as always, a balance between short term and long term thinking and that balance is another thing that is very dependent on your own point of view. But once you know all those things about yourself, then you can figure out a plan to reach the goals that you want to achieve in your investment life.
Unfortunately, those goals are likely to change as well. So if this all is a bit confusing, too bad…. That is life. If it wasn’t wouldn’t life be awfully boring?