Chapter 52 [Invest to get rich! 】

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[The Origin and Today of James] Chapter 52 - Invest and Get Rich! (08/01/2023)

People who want to get rich quickly, because of their fragile human nature, usually lose their rationality. Because of human greed and fear, they will make decisions that are opposite to getting rich by chasing highs and selling lows in the market.

Five myths that lead to financial mistakes.

First of all, we don’t know what we want, we can’t choose the job or career we like, and we won’t necessarily be happy when we buy a house.

Second: We don’t know what the future holds. We think tomorrow will be the same as today, but life and the market may change dramatically in the blink of an eye. We may be unemployed, sick, in love, or divorced. We need to face many uncertain futures. In your mind, you should practice renunciation, renunciation, and separation; in terms of your property, you should prepare for the worst and make the best preparations.

Third: Our expectations for money are too high. Blindly pursuing wealth and spending money indiscriminately cannot guarantee happiness. Buying things indiscriminately may become a burden in life. Spending money on the spiritual level can make us happy forever, but spending money on material things will not make us happy.

Fourth: Lack of self-discipline, often sacrificing savings for the future for immediate desires. The correct thinking should be that for most people, the road to wealth lies in three to forty years of diligent saving and persistent investment.

In the end, we often overestimate our investment skills. In fact, we have almost no ability to beat the market, and it is impossible to get rich through real estate and futures trading. It is difficult for us to get rich quickly, but we can accumulate enough wealth through patience and resilience and get rich slowly.

The road to wealth is a series of rational and patient decisions that take time to refine. The process includes daily cash flow control, savings, sound investments, buying a house, education funds, large expenses, etc.

Savings is the beginning of everything. The simplest and most pragmatic way to become rich is not to invest but to save. Especially for young people, saving expenses and increasing savings is the first step to becoming rich.

But saving faces the biggest enemy of mankind, "desire." This is also the main reason why it is difficult for ordinary young people to implement saving strategies. There are two main reasons why it is difficult for humans to save money and get rich slowly. First, we tend to be so excited about the things in front of us that we don’t think about other spending options. The best way to deal with this mentality is to pause the action, so to speak, asking yourself to wait 24 hours before deciding whether to spend money.

The second is that we would rather choose immediate happiness and ignore long-term goals. The solution is to count the small certainty in the present as future losses, so that we tend to avoid losses. When we can overcome our own desires mentally, we can start to implement actual savings strategies.

When you find that your account has more and more savings, you can start investing to create a positive financial cycle.

Don’t invest like a dream: Countless books on the market teach us to accurately select stocks, read the K-line, beat the market, and pursue huge profits in multiples. However, after investing in the stock market, most people will find that they are not just "retail investors" but "miserable investors." The dream of making big money fades away with repeated losses. Getting Rich Slowly tells us that the first step in successful investment is not to find the right teacher but to invest in allocation. Possible items for investment allocation include stocks, bonds, currency deposit accounts, as well as alternative assets, gold, real estate, etc.

The first thing to invest in is stocks. Investing in the stock market requires taking risks, but in the long run it is the engine of capital growth, and profits can easily exceed inflation.

As for bonds, they can be divided into bonds with small fluctuations, stable interest rates and high returns with large price fluctuations, currency or deposit accounts, etc. Cash investors are considered low risk but may suffer losses due to taxes and inflation; alternative investments are designed to cope with weakness in the stock market but are usually limited to less than 10% of the portfolio. The recommended investment allocation depends on the investment goal. If you want to buy a house within three years, you cannot take too much risk and maybe allocate it in currency or deposit accounts. If the goal is to retire in three years, the allocation may be 90% stocks and 10% cash (or three years of living expenses).

After the correct configuration, everyone is sharpening their skills and wanting to enter the market. But in order to avoid failure as much as possible, we must first see clearly what the stock market looks like. The first and most important point is that investment is a game between amateurs and professionals. The professional game is about who can attack the other side, and the amateur game is about who can defend and avoid losses. The long-term investment in index funds is to avoid failure, and success will come naturally. Data shows that most investors, whether professional or amateur, have a hard time beating the market. Based on this premise, we must diversify risks across stocks (investing in large-cap index funds means investing in hundreds of stocks to diversify risks). Avoid betting outside of a single company (we don't recommend investing in individual stocks). To reduce investment costs and reduce the number of transactions is to avoid failure and success will follow. Smart people will only invest in index funds, aiming to achieve the same level of returns as the index.

Because successful investors are always extremely optimistic, face the sunshine, wait patiently, live a long and healthy life, and slowly become little Buffett, a billionaire or a trillionaire.