Become A Wealth Machine
Back in December 2010, my wife and I, then 25, flew to our 1st ever skiing vacation. We chose Ischgl, Austria. The site and village is located in the Tirol region. It is a must-see area for ski lovers. The area has incredible heritage and rich tradition of foods and après-ski parties. It is well-known for its wild parties and many bars. We were excited. The atmosphere is intoxicating. Snow is everywhere, beer and wine is flowing, and you get to experience Europe at its best. Spas, nature, great people… it’s all so remarkable.
Now to the skiing part of it. We got that covered, right? I came up with the plan. Skiing looks easy enough. We would take a 90-minute private lesson, I figured, and immediately hit the slopes. Why waste time? To the skiers reading this, you are probably rolling on the floor laughing about the soundness of this plan. If I use an analogy from the driving world, it’s like doing 3 driving lessons and stepping into a Formula 1 car – it can only end badly. And it did. Our lesson finished at 10:30 AM, and by noon, after crashing like 4 times, one of which made me think I suffered a heart attack, my wife was crying and saying that she wants to get off the mountain and never do it again. We barely knew how to stop correctly, and we went to ski down slopes where more experienced skiers were going down slower than us. Why, you ask?
Because we were going straight down. Seriously. We didn’t know we were supposed to zig-zag, and that made stopping impossible. I laugh just thinking about it now. An inexperienced skier who thinks he knows it all after learning the basics. You can laugh at me, but my behavior is no different than the actions of tens of millions of people every day. They blindly follow their emotions, half-truths they see on TV and everywhere else, and buy and sell shares like they’re lottery tickets. When you purchase a stock, you now own a piece of a business. Just think about all the paperwork and due-diligence that goes into buying the local neighborhood pizzeria, and then think of the madness of buying businesses every day like they are symbols or tickers without a genuine operation behind them.
It is like skiing downhill without knowing how to stop correctly. It’s stupid. Believe me, I have done both.
In skiing and in investing, doing your homework is the key. There are rules of conduct and a proper way to do it.
It’s funny that people spend $100s on private lessons in skiing, but spend less time and money learning how to grow rich through the stock market. Then they blame the system. The S&P 500 would compound your wealth at an average rate of 9% per year. That means that if you were 18, this one decision to buy the index would multiply your initial investment 57 times by retirement. If you find a simpler way to make 57 times your money, please email me. The action to take is to start by realizing that investing is a profession, and the best way to learn it is by studying successful individuals. Here’s a plan of action for this weekend that will change your life forever:
1. Read “The Intelligent Investor” now. Don’t wait even another second.
2. Read Warren Buffett’s annual letters. Go back as far as you can. They will show you, for free, might I add, how he became rich year after year. They are available here.
When you are done, my advice is to look for a superb newsletter and start reading recommendations and figure out if you want to own the business suggested. I envy you, because you get to do this for the 1st time.
Don’t be as overly confident as I was. Stay humble. Learn how to invest correctly, so you don’t crash.