If you want to double your money very quickly in stocks and shares or if you always wear a multi-bagger attitude on your sleeve, you should stop reading this article right now. This article is about getting rich slowly, not quickly.
Over twenty or thirty years of value investing will build wealth, but you will not be rich from it in a couple of years. A lot of people that trade the markets want to get humongous profits, 100% or more in a year. This is basically impossible even if it might seem on the face of it realistic.
You have as much chance of doubling your money every year for three years as hitting a jackpot at a Goa Casino. To the nearest percentage there is no chance of earning gains like 100% a year from shares and if someone does, they have been very lucky and are not responsible for their good luck. Anyone reading this who has achieved such gains should close their positions just now, collect their money up on a table and count it out before putting it back into the market. It will be a good opportunity to kiss their money a final goodbye. Luck or ‘one way’ markets that provide such profits do not last forever or goes for a long period of time.
Value investing is a technique that when combined with the simple basics of investment provides a basis for building up wealth, with a lot less anxiety and peace of mind than the other investment strategies out there. Other ideas have come and gone, yet value investing keeps on going. One of the reasons for this longevity is that value investing requires discipline and some work. It is rather boring and most of the people lack this discipline. We all know that around 90% people lose money in stock market so in a way we can say that only 10% people have discipline.
People are drawn to risky games — and the stock market is considered risky — and they like excitement and chaos. These ‘punters’ want to make quick money because they have a gambling streak. Value investing does not satisfy the gambling urge very much as it is quite drab, rather unexciting and takes regular maintenance. Gamblers want minimal work and plenty of sensation which is just opposite of value investing.
Sensible investing is not difficult, it is just work. The less you get paid by the stock market in thrills and spills, the more you will earn at it in cash. Value investing has been a very reliable method of making wealth in the stock market and it is a good place to start for people who want to build up wealth and don’t want to be gamblers. Value investing works because investors build up their skill in stock selection picking under-priced assets. They do not risk much of their money on any stock in particular and they know what they are buying and why. This puts the value investor in a small, smart and diligent group of people buying and selling shares and this select nature is a large part of why it is a successful way to make money from the stock market.
We will be discussing in details in upcoming articles like how to start value investing, how to do value investing and why value investing works.
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