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Why Investing is Not a Get Rich Quick Scheme

by Bruno Deshayes on 05 May 2016 permalink
You wouldn't pull out a seed you just buried in a pot to see how the roots are doing. You keep watering it with tender loving care. Then the first stem and green leaf show up to confirm it is working. You should do the same when you put your money out to work.

There are many parallels to be drawn between investing and agriculture. The same principles apply to both.

Returns are a function of time
Regardless of the prevailing mood people still need to buy food, petrol for their car, clothes to wear, etc... Invest in those industries because there will always be a demand for these products.

Impatience is your downfall
How many times have you heard of someone pulling out of the market with a loss in a panic attack? Six months later the price of their stock finished 20% higher than their purchase price.

Risk is part of the equation
The knowledge of the future does not belong to us. But one thing we know. If you don't plant seeds there is no harvest. If you're not in the market there are no profits. In fact you could say that the only reason you ought to make a profit is for your ability to handle risk. By buying shares you provide liquidity into the market and allow businesses to raise capital.

Invest in an industry where you are knowledgeable
A farmer doesn't pick a crop at random but knows the intimate details of each plant he grows. Likewise you need to know the drivers behind a company. You need to have contacts with people who work there to corroborate whatever news or rumour is doing the rounds.

Do not confuse investing with speculating
In fact there is a fine line between speculating and gambling. It is manageable to pick a reliable trend over weeks and months but if you go hour by hour like a day trader you are in a fog.

Take responsibility for your investments
Do not hand over your life savings to some manager to do the work for you. That's the only way you will learn something out of the experience. The one who has built the expertise deserves the profit - not the bystander.

Go for companies that pay dividends
Capital growth is good but if the business is sound they should pass on some of the profits without you having to sell your shares. Check the track record on dividend payouts and compare companies with each other in that regard.

Cast your bread upon the waters, for after many days you will find it again.



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Bruno Deshayes

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