Nine Fundamentals to become a Successful Stock Market Investor
“You have to keep learning if you want to become a great investor.” by Charlie Munger, Warren Buffett’s Partner @ Berkshire Hathaway, in Buffett’s 2022 Shareholder Letter
Introduction
At this website, and the Book (being written) that it supports, (The Stock Market-Route To Inter-Generational Wealth (For those who want to build some but feel intimidated) we want to be the financial-change-maker in your life, and the future of your progeny, wherever in the world you live. This means ‘buying’ into the concept, long known by the billionaires, that the way to wealth is not so much by man working for money (though it helps) but, rather, man putting his money to work for him.
Put another way, we are strongly encouraging you to;
a. Learn the tools, and strategies, of putting your money (however small the amount) to work for you
And, or,
b. Consider committing to be the ‘chief cornerstone’ and ‘first builder’ to lay the foundation of wealth for your child, grandchild, great grand child and those who will follow after them
Accordingly, we keep reminding you that this website is what we call an Action Station. The idea is to get you to accept, and internalize i.e. really believe, that you, too, can partake in the richness and wealth of this world, whatever is your present station in life and on whichever continent, or country in the world, in which you live, and work.
In this context, we are constantly grappling with three realities as follows;
c. When many people see the world ‘wealth’, they tend to exclude themselves because, it conjures ‘having lots of money’. This is one of the mindsets we encourage you to change because, you may not be wealthy yet but we want you to cultivate the thought, the mindset, that one day you can be wealthy too.
d. Think, instead, of ‘growing’ what you can afford, one dollar at a time, over the decades in your life. If you invest $1,000 in the market and, over time, it becomes $2,000, you would just have doubled your money or created an additional $1,000, just as when abillionaire increases his $1.0B to $2B. But, we may not all become billionaires. Still, focus on the percentage change, not the amount you have to invest. See later at Newsletter#16 in this Series
e. The third reality is the fact that everyone will not necessarily want to learn the rules and strategies of successful investing. Some will just want to hand their money to a wealth advisor and, in effect say, “go and invest it for me”. And, this is very Ok if that is what you want to do. But this reminds us of the adage (with a little poetic licence) “Give a man a fish and you feed him for a day. But, teach him, (John Brown, JB) how to fish for himself and you teach him how to feed himself for life”
In this Series, we are looking out specially for the ‘John Browns’ of this world who want to learn how to feed themselves for life by learning the transformative concepts, and strategies, that will enable them, not just to get, if they are lucky, but, instead, to take their fair share of the immense wealth of this world. Here, it is important to distinguishing between getting and taking.
‘Getting’ implies waiting on the generosity of others. ‘Taking’ implies using one’s own resources to acquire what he, or she, wants. Because, if we are to believe the pronouncements and illustrations of many of the world’s wealthiest investors, we know that successful investing is not as easy as sleeping late on a raining Sunday morning but, that, neither is it much more complex than that. In other words, any, and all of us, who want to learn to do our own ‘fishing’, can!
So, as already mentioned at item b above, you are reminded that this is a Self-Improvement website and are invited to be bold, and make the decision now, to start building a little ‘something’ for yourself. Let future generations in your Family Tree recognize you as the person who started the wealth-building tradition. That’s how many of today’s wealthy families got started; from ‘scratch’ with just an idea. It is possible!
You will need to digest some ‘fundamentals!’”
It is true!
If you want “To enable more families, from more countries, to use the strategies of Inter-Generational wealth creation, through the stock market, to create more wealth, for more family members, on a revolving basis” you will need to know, and understand, what I call the Nine Fundamentals of the stock market. These are they;
1. Have a Mindset change about your relationship with money. Its your money (however small the amount now) that should work for you vs you working for it (though, having a job, or career, and getting paid for the work done is advisable)
2. Have a reason to invest i.e. for your money to work for you
3. Become a friend of the concept of compounding.
4. Don’t just ‘spend’ your time. Let it work for you, too
5. Cultivate the discipline to save and invest. It does not ‘come on ‘automatic’,
6. In investing, give priority to percentage change in what you invest vs the amount you have to invest
7. Have patience. Your money will need time to grow and make you wealthy
8. Understand the power of the stock market, one of man’s greatest innovations. It provides a platform on which the greatest two wealth-building concepts in the world can work together for your benefit. Those two concepts are compounding and time (as measured in decades)
9. Markets move up (called a ‘bull’) and down (called a ‘bear’). Understand the ‘gifts’ that a bear market ‘brings to town’ for long term investors (which is what we encourage you to become.) As Shelby Cullom Davis, one of Wall Street’s premiere investing families said some time ago, “You make most of your money in a bear market, you just don’t know at the time”
#1 What is a mindset change?
In the ‘good book’ it is said that “man should live by the sweat of his brow”. Whereas there is nothing inherently wrong with this advice, there is a commonsense imperative that implies that we should see the assertion as a guide to how we manage ourselves, and, the money we get from our livelihood vs regarding it as a literal dictum.
Two of those commonsense imperatives are the concepts of
- Compound interest and
- Time (as measured in decades)
We will discuss these two separately in later Newsletters so, for the time being, we just want to point out how common place it is to engage these two wealth-building ideas or concepts and that, as such, all of us should do so i.e. use both concepts, or facilitations to build some wealth, if not for ourselves, then for those for whom we care.
So, if we are burdened down, or constrained financially, by the assertions of the ‘good book’ or a misrepresentation of it, what should we do? The alternative is to have a change of mind or mindset change about ourselves and our money. Put another way, we should change our relationship with money and start seeing it as a commodity, or tool, that can be used to achieve specific objectives such as building a little personal or family wealth. In short, instead of literally relying ‘on the sweat of our brow’ to get some money, we could, instead, invest what money we have so that it generates some more of itself relying on (a) and (b) above.
In order not to be misunderstood, the assertion of putting your money to work for you versus you working for it does not mean, and is not implying, that we, as people, should not pursue our respective careers or ‘trades’ and be paid for the work that we, ourselves, do. It simply means that we should endeavour to get our money, however small the amount, to work as hard for us as we work for it (as represented by the remuneration that we receive on pay day)
We can use the millionaires and billionaires for illustration. Many of these people just hand their money (usually inherited) over to their wealth advisors and go off to play golf or travel the world, stopping only to read the financial statements that they get, speaking, maybe mostly, of the amount of dividend that they earn per quarter.
The reality, though, is that some of the hardest workers anywhere in the world are among those same wealthy people. Their ‘brows sweat too’ but, for these people, that ‘sweat of their brows’ is not from working for money. Instead, it is from making sure that their money is working for them in a way that earns them the most returns.
In summary, this is what the rest of us need to, and should do for ourselves and our family. We may never, for whatever reason, become billionaires but, we can, and should, learn from them. Maybe, they became billionaires not because they received a multi-billion dollar legacy from a long ago family member who laid the cornerstone of wealth for them but, maybe, because they themselves started from scratch and insisted that their money, however small at first, work for them. The focus of this essay is that you buy the concept, that, it is your money that should work for you vs you working for it. And, if you have only $1,000, and you invest it, and it increases to $2000, you, too, would have just put your money to work for you.