Learning to build wealth – from the pros
If you talk to enough successful investors you’ll find they share some common ways of thinking.
I reached out to some prominent individuals on Twitter.
Each has a large online following and considerable experience in their “circles of competence.”
I distilled their combined knowledge into short, digestible nuggets of wisdom in today’s post.
I asked all of them to answer one simple question:
What has helped you the most in your investing journey?
Below are the curated responses.
All answers are surprisingly personal and concrete. No text book hypotheticals or theories.
On developing a routine
It’s certainly a routine or a strategy, whatever you call it. Whenever I had extra cash, more than I wanted to keep in reserve, I invested it in dividend-paying companies that I thought were good. I didn’t usually think about whether the market was high or low, whether to buy now or wait, I just bought regularly.
On having a long term mindset
Having a long term goal and investment horizon has helped me get through market volatility and downturns. On top of this, because of the goal, I was able to see the pullbacks or crashes as opportunities to buy assets and accelerate my goals. Having that long term view is critical for building wealth – regardless of the underlying asset or investment style.
Sticking to an investment strategy that keeps me invested for the long term is key. One strategy that keeps me invested regardless of what happens in the stock market is dividend investing. It’s easy to stay motivated since the progress is measurable and trackable. As an income investor, I actually get more excited when stock prices are lower because that means dividend yields are higher. In turn, I can increase my income faster.
Having the mentality that it’s a long game and recording / watching the income & portfolio grow, just gets me hyped. It’s working, I gotta keep feeding it. Mentality First – opm 2nd. =)
On being a perpetual learner
Be curious. What I mean by this is to ask yourself some questions from time to time – what makes something or someone do something. Take time to reflect. Why does this or that happen? Through the power of “why” if you will, learning takes place. Learning is an important life skill and that life skill applies directly to financial literacy. You don’t need to know how everything works. Rather, you just need to know enough to apply your learnings as part of some simple rules that work for you. Simple is usually better when it comes to investing.
On committing to process
Sticking to a process has definitely been helpful for me in achieving my goals. I work on improving my process by analyzing transactions, identifying mistakes and hopefully learning from them. Staying diversified to minimize the impact of mistakes is part of my process. It prevents me from catastrophic loss when I make errors. My process also involves investing regularly so I can compound my money right away, rather than try to time the markets and miss out. Finally I focus on reducing costs, which helps me max out tax deferred accounts and save a ton on taxes.
On critical thinking and making decisions
The key to being a successful investor is similar to a scientific approach:
– Think deeply
– Develop a hypothesis
– Be convicted in your thinking
– Take action on your convictions
When thinking deeply, seek out experts who have differing views: whether bullish or bearish on your thesis, and learn from them. Read as much as you can, whether online, articles, or books. By doing this, my real estate acquisition process has changed over time and I have been able to generate oversized returns relative to the average real estate investor and grow a $9 million portfolio.
On tracking your journey
The key to success in my investing journey has been tracking my expenses and net worth every month. Doing so has allowed me to see where my money is going and learn what moves the needle as I progress towards my retirement goals. It has helped me focus my spending on what I value, and motivated me to contribute even more to my investment accounts.
On knowing what you own
Invest in what you know and invest in what people use. This is a strategy that I use and follow and I’ve had good success following this. I invest in company’s that provide services that we need or use on a daily basis such as banks, telecom, utilities, energy etc….
On keeping emotions in check
The one key thing that I’ve learned along my investment journey over 15 years is to separate emotion from investing. When emotion is involved, we often make short term, knee-jerk decisions that will hurt us in the long run. It’s always tough to see the value of the portfolio take a significant hit, but we must ignore short-term noises. In March 2020 our portfolio was down by $250,000. Rather than freaking out and selling, we actually purchased $115,000 more stocks throughout the year. Thanks to not getting emotional with short term volatility, we now have a sizable paper gain.
On leveraging your existing assets
I constantly search for ways to make our money work harder for us. Doing this has led me to one of the most powerful way to supercharge our wealth: leveraged investing using our home equity. Leveraged investing turned our house from an illiquid, highly concentrated investment into a diverse portfolio of wealth-building stocks. Plus, even better—it helped my husband and I reach FIRE years sooner! We plan to continue our leveraged investing strategy indefinitely. We’ll also teach our kids about it so that they can continue the strategy (even after we’re long gone)!
On acknowledging luck
I’d have to say that luck carried me through until I figured out how to stay out of my own way. Early in the investment process I shaded to gold and commodities during that previous commodities super cycle. That was only due to the fact that I had a gold client at the time (in my advertising work). I was influenced let’s say, ha. I harvested most of the profits as I switched to a more passive approach. A few good picks also helped the cause, including Apple, BlackRock, and Tim Hortons. Do your research. And then the less you do, the better.
On using the right systems
Creating and following systems with my real estate investments has accelerated my path to financial independence. As a mom and full-time teacher, there are always demands on my time. But creating a system for self-managing my rental portfolio helps make things easier. Every time there is a task to do, I can just follow the system and not have to overthink it. Having a system also helps keep my emotions in check which would be the second thing that’s helped the most on my investment journey.
On finding the right motivation
Understanding the large wealth gap between men and women has helped me focus on maximizing my returns and educating other women to close the gender wage gap. Knowing that on average women hold only 30% of the assets that men do is fuel to ensure I’m always earning 10%+ on my money.
On staying out of your own way
Saving myself from myself was the most profitable move in investing for me. I used to day trade very often and lose money until I started reading personal finance blogs. When I graduated college, I contributed most of my money to the S&P 500 in my 401k. I actually do not know how to buy and sell securities in my 401(k) because their user interface is so complicated. Therefore, I literally do not and cannot day trade because I don’t know how to use the interface. By making my investments 401(k) heavy, I profitably saved myself from myself.
On taking calculated risks
Since we started our journey to financial independence the goal was to retire in 2028. What helped us the most is the willingness to take risks. Using the equity from our home, we were able to jump start the investment portfolio, which gave us access to borrow even more money from the broker. As a result, we can see an increase in our portfolio that put us on track become financially independent in 2024.
On trusting your decisions and looking ahead
Set it and forget it. I like to learn as much as I can about an investment before I jump in. But once I have done all the due diligence and considered all the known unknowns, and decided to accept the risk vs reward – I invest and move on. I don’t spend any time obsessing over the daily or monthly fluctuations. Free your mental bandwidth up for new opportunities and let your investments have time to work and compound.
On the benefits of practicing patience
While time is your biggest asset, patience should be your biggest virtue. Too often investors think that in order to build wealth, it needs to be complex and time-consuming. It can be if you want it to be. But as decades of successful index investors have shown, investing can also be simple and boring and still make you a millionaire.
Patience has played a major role in my investing success. I have achieved life changing results by finding asymmetric investment opportunities and HOLDING. I was able to do this in cannabis stocks and uranium stocks (fuel for nuclear power). Most investors either jumped on these trends late, or missed out on massive gains by trading in and out. Deep research is important to build conviction because you may need to sit on dead money while your thesis plays out. This isn’t easy when you see others making quick money in fads. But if you are correct, you will be handsomely rewarded.
On the importance of planning
One thing that helped me the most when it comes to investing is to come up with a consistent plan. Over the years my investing approach has evolved and I am very comfortable with what I am doing now which is a hybrid ETF and individual dividend stock approach. I dollar cost average each month and it takes some of the emotion out of investing. Math shows that putting in a lump sum is a better total return, but the DCA approach helps me sleep at night. Knowing who you are as an investor is very important when executing your plan.
On screening for quality
When I first started investing, I put my cash into terrible assets that were optically cheap. I posted lackluster overall results that were saved by a terrific savings rate. After a while, I finally figured out the benefits of investing in quality companies that generated gobs of cash flow. That switch to quality increased my returns, helped me sleep better at night, and protected my portfolio during the 2020 crash.
So much to consider
Thanks to all the amazing investors above for sharing their thoughts. 🙂
I like how their different backgrounds provide a wide range of perspectives.
I’m lucky to have so many insightful peers online.
If any of these speak to you, consider following them on Twitter.
If you got anything novel out of this post, you can apply it to your own life.
Think about what a successful investor would do.
Improve your investor identity. Tweak your world view. Change your investment outcome.
Personal finance is 20% head knowledge, and 80% psychology.
You already have the knowledge. 😉 Now it’s just a matter of applying that investor psychology.
As for myself reading has helped me the most on my investing journey. I don’t think it’s possible to read a lot and not become successful in one way or another. I’ve already read so many good books and can’t wait to consume more. Reading teaches me how to think and connects me with some of the greatest minds throughout human history.
Feel free to share your ultimate idea for investment success in the comments below. 🙂
Random Useless Fact:
Hollywood perpetuates stereotypes.
I think what Mark Seed said was definitely super underrated. Yes, we’re all investors here but I also would like to point out what we really are.. is entrepreneurs with a curious mind. We have majority of our money passively in the index but we’re also curious cats that always wonders about what all the fuss is about. You can’t be giving your hard earned money over to some entities without doing research; and I think this is the best part of being an investor. I would say ALWAYS keep an open mind even if the opportunity or idea is out of whack because who knew this receding hairline South African is now worth $300 billion or who knew a buncha so called “degenerates” from an open forum took on the big guys on Wall Street and made off with millions lol.
My recent visit to BC in a Chinese restaurant had robots serving dishes each unit costs about $20,000 CAD, is it stupid? Yeah maybe, but it’s worth looking into lol.
Mark is really good at packing lots of value into short words. His blog is worth checking out too, linked above. Oh man, that South African you mentioned has created wealth beyond a lot of people’s expectations. If only he was half as consistent with his romantic relationships as he is with making money, lol.
Thanks for the opportunity. Great content and lessons 🙂 In our case, taking risks is something we are more comfortable, but not easy when the stocks are down 🙂 Either way, it is all about the journey and the long term.
Totally agree, Gean. The journey and long term are what matters. What’s interesting is the more stocks move down the less risk investing new money becomes since you’ll be buying profitable companies with a higher margin of safety. 🙂
Haha cool I get to be beside Nelson!
Great post, I liked how everyone had different perspective about investing.
Yes, investing is 20% knowledge and 80% psychology- have you read Psychology of Money? I just finished reading it recently, such a good book.
Not yet. I’ll add it to my reading list. Thanks for the suggestion. 🙂
This turned out great, Liquid! Very helpful advice for new and experienced investors to consider. Patience, consistency, and formulating a plan seem to be a common theme. Thanks again for the opportunity to contribute.
Those themes do seem to be very common. I was actually expecting more investors to mention the same ideas, but the results are surprisingly diverse in thought and strategy. I certainly learned to look at investing from a new perspective after this post. 🙂
great post and a very nice read. While everyone has a slightly difference approach the mindset seems to be a common trait.
Thanks for putting this together Freedom.
For sure, Rob. It all starts with the mindset. It’s why people born into poverty can become financially independent. And those born with a silver spoon can easily squander their chances. Thanks for contributing to this post. 🙂
Hey Liquid—thanks again for inviting me to join in on this post. There’s so much great wisdom here. It’s nice to gain more insight into how some of my favourite blogging friends approach investing.
My pleasure, Chrissy. It was fun learning about how everyone invests, and the different types of motivation. 🙂 Anyone who incorporates all of these ideas into their decision making should see great investment returns long term.
[…] With those reflections mind, I was recently asked to contribute to a post on Freedom Thirty Five Blog about just that – what successful investors do. Check out that post for my thoughts and my curiosity comments that headline Weekend Reading. […]
Great post, Liquid! Love seeing everyone’s diverse opinions.
Thanks for contributing and sharing on social media. 🙂 I’m always learning so much from this online personal finance community.