Patience & Profits

You don’t need to have a lot of money to invest, but you need to invest to have a lot of money.

And you have to be patient.

Invest today and profit tomorrow is simply not working, if you are looking for a quick buck – casinos are open 24/7.

I noticed over and over again, that the long term-view is not very common in many romanian businesses. This is to a certain degree understandable, since the goal to cash in quickly seems to work here in many cases – why bother for the long term?

This summer, I had exactly this conversation with a proprietar of a hotel at the Black Sea. The relatively small 3-star place was nothing special, but clean and offered a great view across la mare.

I had an upcoming meeting (for the staff of a company, I advise) in mind, and thought, this hotel could serve the purpose for that seminar.
‘Could I rent this place for a weekend in the middle of October?’ I asked the proprietar.
Of course not, since the hotel is closed after September and would only reopen for the mini vacanta next May. And this place is by far not the only cazare at the coast with this schedule, as you surely know.

Obviously, the proprietar earns so much money during summer, he doesn’t have to care for the rest of the year. Why should he think long term and diversify his offer – in case of a rainy summer – as long as the tourists pay any asked price, only to be at the Black Sea in August?

A short-term view may pay off here, where consumers are not really used to demand a fair value for their money – but it’s certainly not working in a more competitive environment in general and the global financial markets in particular.

Patience is a condition for successful investing. It’s like planting an apple tree. You won’t have an immediate effect for your efforts, but if you are patient, you will reap the fruit of labor.

The best way to be patient is to set long term goals. Maybe you just became a parent, why not invest for your child to finance an excellent education in 20 years?
Or you’re in your late 30’s, early 40’s and you know already now, you’re gonna get screwed if you rely too much on your pensie. Why not invest now to be more independent in the future?

Is there a guarantee to be successful with an investment in financial markets over a long term period?

No, at this point in life, there’s only 1 thing guaranteed: taxes.

If you still consider a long term investment, I suggest to think about investing a fix monthly amount according to your personal budget into an Exchange Traded Fund (ETF, see chapter 8) covering an index like the Stoxx 50 or the S&P 500.

With this investment you could profit from the performance of the 50 biggest companies in Europe or the 500 largest US-companies. And through a monthly investment schedule, you take advantage of the cost-average effect (see chapter 15) and automatically buy more when prices are low and less when priced are high.
ETF’s are relatively cheap in fees compared to mutual funds or direct investments and therefore a good choice for a long term investment.

If you’re not convinced about the long term investment-success, then my advice would be to buy a 3-star-hotel at the Black Sea.

When stock-investors want to get an indication of the direction the market is heading in the future, they should take a look at the mighty bond-market. More on that subject – coming up in the next chapter:

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