To accumulate wealth over the long run, it’s a fair bet that you need to learn to say “no” a little more often than you do, particularly if you’re the type of person who enjoys speculative investing.
If you’re more of a feet-on-the-ground conservative type, happy to accumulate wealth in very safe and conventional ways – and not the type to speculate, then this probably doesn’t apply to you.
But it is important to get started early; according to the recent data source HSBC study, people between 25 and 36 years old today who own property are destined to pay off their mortgage aged 60 on average. But those of the same age who haven’t yet taken the first step on the property ladder will take an additional seven and a half years to clear their mortgages, on average.
So if you’re trying to make a faster start than most – this may be a good thing. But you also need to learn to be suspicious and this is often a lot harder than you think. The art of the entrepreneur is partly to sell you the idea – an idea about which they’re always tremendously enthusiastic of course. And one thing entrepreneurs are very good at is sweeping you along with their enthusiasm. Of course, this can end up being tremendously lucrative, but it’s a fact of life that most new ventures either fail or perform a lot worse than expected.
But don’t take our word for it. Instead, go to the “sage of Omaha”, Warren Buffett. for the same basic advice. Buffett has sometimes referred to his long-term legendary business partner Charlie Munger, as the “Abominable No Man”. This refers to Munger’s usual reply when presented by his partner with an investment suggestion. In this way, Charlie Munger has been Warren Buffett’s most valuable asset over many, many years.
If you’re one of life’s natural optimists, or if you’ve taken a couple of investment shots and only known success so far – or if you’re just starting out, then you’re far more likely to be taken in by the next great investment growth story. If you see yourself in any of these categories, then you really need to learn to just say ‘no’ – there will always be other opportunities.
Another way of looking at this is to say “if in any doubt, leave it completely out”. It’s rather like watching Dragon’s Den on TV. Many of us would be taken in by an excellent presentation and an exciting prospect before the dragons start their questioning. But once they’ve unpicked matters, we often think “no way”. So we need to learn to do that unpicking for ourselves. Always remember that most things fail.
This may all sound very Scrooge-like and curmudgeonly. But if you can be cynical about an investment possibility and look for the weaknesses in it, you will benefit. You probably will miss the odd world-beating investment this way, but you’re also much more likely to retain your capital and build it up in the long run. Remember; the tortoise always beats the hare in the end.