Rome is not built in a day. We should not aim to be rich overnight. With perseverance and patience, as long as we are not tempted by get rich quick schemes such as invest in ponzi schemes, we can definitely achieve and build our wealth over long term.
Just like a wine, it gets better with age. Time is our friend when it comes to create wealth. Compound interest is deemed the eight wonder in this world. Compound interest over time can create enormous wealth.
We define long term investment as a minimum of 5 years, even though during this period the stock value has dropped by 50%, we will not be shaken and sell out in panic. We need to have a strong faith to hold on to strong quality stocks that are within our own circle of competency, business with growing revenue, and equipped with strong economic moats.
Long term investment does not mean holding on to the business forever, we need to analyze the stock from business point of view. If the stock price is exorbitant and has already priced in for for crazy high future growth, or business has deteriorated, then it is worth selling to cash out profit or cut loss. If the business fundamental has not changed and the share price continues to drop or business revenue growth is much more than the increase in share price, then it is worth to double down and purchase more shares.
A suitable business to invest in for the long term requires the following:
1. Business growth needs to be increasing at a stable rate
2. Business market share will not decrease due to competition. It will be ideal if it has monopolistic characteristics in terms of services and products offering.
Like everything which is worth chasing after, it will never be easy. Behind every successful person’s journey, earning the first million is always the toughest. The next few millions will be easier and duplicated faster. Investing is about thriving and not just surviving.