Time is the secret in investing
If one is ready to wait for long enough, many of the investing mistakes will stand corrected. Patience is the biggest skill in investing. Many studies have shown that it is very hard to lose money over long periods of time, if one chooses to stay invested. Obviously this also includes staying invested in the right kind of broad based instruments like index or Mutual fund or a blue chip company. You can’t make money on a dud however long you may be ready to wait but you increase your probability of not losing money by being patient.
Warren Buffet accumulated 90%of his current net worth after the age of 50
You cannot emulate Warren Buffets stock picking skills but what you can emulate is his patience. Faith in the process and sticking to the game can make a remarkable difference.
Time has an outsized impact on the final outcome, larger than the rate of return and initial investment since the time is in exponent in the equation P*(1+r)^t. Compounding is not easily conceivable because we are used to linear thinking. We can easily calculate 6+6+6+6+6+6+6+6 but 6⁸ is neither intuitive not easy to calculate. An average person has a short span of patience and which usually runs out even before compounding magic begins to show results.
Compounding is like a Chinese bamboo tree, nothing happens for 5 long years and then suddenly in 6 weeks the tree grows from ground to 90 feet tall
Good investing isn’t about earning the highest rate of return but about earning reasonable returns over very long periods of time. You don’t need to do anything fancy but just hang in there with boring returns. Trusting the process, watering the investment every month consistently over the years to see the magic happen.
You would have heard countless stories of small investors making it big. Someone invested 10,000 INR in Wipro stocks in the 1970s and reaped 500 Cr INR or about Mr Read who worked as a Janitor but died a Millionaire in 2014 at age of 92. Above all these stories teach us one thing, to be patient with investments and allow it the time needed to turn ordinary sums to handsome corpus.
Ref — Psychology of Money
