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How can you propel yourself to a rich retirement?
Many of today’s investors have a short-term mindset, and are more inclined to buy into speculative securities like marijuana stocks or questionable assets like Bitcoin.
It’s human psychology to want to get rich quick. Our time on this planet is limited, and we want to be able to enjoy ample resources while we’re young. We’re not getting any younger either, so naturally, some folks choose to go the route of speculative “get rich quick” types of securities that tend to blow up, resulting in substantial losses that end up setting the investor back even more.
The “YOLO” (you only live once) and “FOMO” (fear of missing out) mentality has been spread through social media, fuelled a massive appetite for speculative assets, probably unlike anything we’ve witnessed before. Today, marijuana stocks like Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) and cryptocurrencies like Bitcoin are feeding the hunger of the average person’s desire to get rich quick.
When placing a bet on speculative securities, you’re relying on the “greater fool theory” (that’s a lower-case ‘f’), in which you buy an asset and hope that someone else will be willing to pay a higher price than you for no fundamental or logical reason other than momentum.
Although you’ve probably heard a ton of stories about Bitcoin and marijuana millionaires being minted over a short period, you never hear about the stories of the unfortunate and overwhelming majority who lost their shirts gambling their hard-earned money on speculative securities or assets. These aren’t remarkable stories, but they happen a lot more than you’d think.
With the rise of dangerous derivative products (like ETNs) that are designed to fuel the public’s hunger for speculation, investors ought to realize that they don’t need to participate in any of the short-term “opportunities” to build wealth. You don’t need to risk your shirt to get rich. You just need patience and a long-term horizon.
The emphasis should be on holding a wonderful business after you’ve purchased shares, not trading in and out of it in conjunction with short-term public sentiment. Although making a quick buck by trading a speculative stock may be terrific watercooler conversation material, you could end up ultimately treating the stock market as some sort of casino. And one day when a trade goes sideways, you may end up giving up on investing as a whole, when you’ve actually never really invested in the first place.
How many billionaire short-term traders can you name off the top of your head?
Not that many, I’ll bet. Now, how many billionaire long-term investors do you know of? Probably too many to count if you’ve been investing for a while! Most of these billionaire investors have a long-term mindset and they ensure proper due diligence.
As a retail investor, you must ensure you’ve done your homework beforehand so you don’t end up being frightened out of a position shortly after hitting the buy button. If a new stock idea comes to you, make sure you’ve had enough time to think about the underlying business, the economics of its industry, and the opportunity at hand.
If you’re busy and the process takes weeks, months or even years, then so be it. There’s no excuse for buying a stock without having a good list of reasons for why you own it.
So, how can you safely propel yourself to a rich retirement?
Have a game plan before buying a stock and stay out of your way after you’ve bought it. Don’t be phased by short-term noise and keep adding to your thesis so you know whether you should be trimming or buying more of a stock that may have dipped. Sometimes the best opportunities are the ones that are hiding right under everybody’s nose.
Think Canadian National Railway Company (TSX:CNR)(NYSE:CNI), an extremely wide-moat business whose stock has crushed the TSX consistently over the course of decades. The company is in position to continue to do so, and if you keep buying on any dips, you’ll probably get rich off the growing dividend payments alone through the course of decades.
Stay hungry. Stay Foolish.
