Personal Finance

Success Clues Part 1

Jun 19, 2016 | Personal Finance

The only way to become wealthy is to think like a wealthy person. The best thing that can happen to you is to communicate daily with rich individuals. You will quickly notice they operate differently, independently of what others would do in similar situations. Their decisiveness is overwhelming and inspiring. The only way to evaluate if you should listen, learn, and emulate another person is by his or her results. Wealthy people produce astonishing results, and it’s worth the time to find those who do it systematically and purposefully. If you have no such friends, then you are very lucky to be alive at the age of information. Their thoughts are everywhere, written down as biographies, autobiographies, interviews, and quotes.

Three of the greatest people to ever allocate capital are Peter Lynch, Warren Buffett, and Ray Dalio. Their achievements are remarkable, and there is a wealth of knowledge to learn from them. Warren Buffett earns more than a million dollars a day. Peter Lynch ran the most successful mutual fund in history. Ray Dalio is considered by many as the most brilliant man in the investing sphere.

What Peter says

“Often, there is no correlation between the success of a company’s operations and the success of its stock over a few months, or even a few years. In the long-term, there is 100% correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient and to own successful companies.”

WRG interpretation

Stocks are part ownership of an entire business. For an investment to be successful, the company has to be profitable and have an enduring, competitive advantage. A market is made up of buyers and sellers, and since not all individuals study the company with a fine-toothed comb, the price might not reflect the current value, since investors buy and sell every day for many unrelated reasons. The difference between price and true value is the opportunity we all have to buy low, and the law of averages ensures that the true value and higher price will be reflected sooner or later. This is incredible advice, as it hints to the fact that we should buy more when the stock is suspiciously low. Often in the stock market, several years of patience are rewarded in one. Only the wealthy are able to perform at high levels of execution when the emotions are strong to the contrary. In the resource sector, it is even more difficult, since the volatility is enormous. The opportunity lies in the research. Wealth Research Group conducts an immense amount of analysis, and we came to the conclusion that we are now absolutely in a favorable environment for precious metals. We even published an entire manual about the subject.

What Peter says

“Most of the money I make is in the 3rd or 4th year that I owned something.”

WRG interpretation

When you purchase stocks, you can’t perfectly purchase at the bottom. Many times, the stock will trade for less than you bought a few weeks or months later. Therefore, when you establish a position, buy in increments. I personally never miss an opportunity to buy more shares in a company that is improving, while the price is below my purchase price. I wasn’t that savvy when I was a rookie, and experience has taught me otherwise. Great companies always trade for their true value sooner or later. Fear crippled me when I got started and I will end up with millions in “lost opportunity.” Your only concern is concentrating too much in one investment, not that any one stock is lagging. We have tackled this problem and offered our solution, called Asset Allocation.

In Success Clues Part 2, we will be interpreting Warren Buffett, who we believe is making a huge mistake when it comes to seizing the opportunity mining companies present these days, and yet he has the most brilliant financial mind of our times. It just shows you that nobody is perfect.