It turns out that Isaac Newton was a better physicist than he was an investor. Newton lost a fortune-around £20,000-in one of history’s most notorious market collapses, the South Sea bubble, when the South Sea company collapsed in 1720 (that’s the equivalent of about £7,500,000 in today’s money. Ouch!)
Do you want to know a secret? Building long-term wealth through investment doesn’t have to be complicated. And it doesn’t depend on making forecasts. The simple fact is that market returns are there for the taking, so long as you stay disciplined and build a diversified strategy around risks that carry a reliable reward.
The media would have you believe that a successful investment experience comes from picking stocks, timing your entry and exit points, making accurate predictions and outguessing the market.
Is there a better way?
“A million bucks won’t get you much these days”.
I was taken aback by the comment.
We tend to use that number to decide who is rich and who isn't. “Oh, he’s a millionaire, he can afford it”.
A great takeaway from one of my favourite money books, The Most Important Thing by Howard Marks is about understanding cycles.
Here is how he explains it:
William Bernstein has several good reads, including the one I’ve just finished The Investor’s Manifesto, Preparing for Prosperity, Armageddon and Everything in Between. (yes, I was lured by the title)
For those that haven’t heard of William Bernstein, his status is legendary in financial circles. There’s a couple of things that I really like about him –
When you haven't got much capital of your own, the road to financial security can seem long and arduous. But the truth is that wealth building is actually pretty simple.
All it takes is time and the price of a cup of coffee.
So much of what we see in commerce is unnecessary complication masquerading as added value.
In the introduction to his book 23 Things They Don't Teach you About Capitalism, economist Ha-Joon Chang writes:
Hello volatility, welcome back. It’s been a while.
As share market investors, we should appreciate that we’ve had it pretty good for several years. It’s hard to understate how smoothly world equity markets have climbed since things settled down after the 2007-09 crisis.
I took our dog for a walk down to the beach last night. It’s one of those white, fluffy things – it has way too much energy and I need a very long lead. I was walking from home, through the dunes, to the beach. I’m going at a slow and steady pace, heading pretty much in a straight line, with only the occasional detour to walk around a fallen log.