One thing that has always bothered me is when I see news articles profiling people who have made a lot of money after hitting it big with a single stock. In recent weeks, we’ve seen stories about people who have become millionaires thanks to investing in Tesla or Bitcoin. Not too long ago, we were seeing stories of people who hit it big with Amazon. Before that, it was Apple. And before that, it was Microsoft.
And don’t even get me started on the whole GameStop saga…
It’s not that I’m jealous (or maybe I am a little bit, who am I kidding). My problem with these stories is that it gives people a warped view of how you actually build wealth. We’re a society that wants to get everything as soon as we can, often without having to do much work. These stories of Teslanaires and Bitcoin millionaires reinforce this fact, giving the impression that getting rich quickly really is possible if you’re simply clever or smart enough to bet on the right stocks.
Worse yet, these stories of Teslanaires and Bitcoin millionaires teach people the wrong lessons about investing. If anything, they may be harmful. People start to think that investing is about picking winning stocks and hitting home runs. I know when I was younger, that’s what I thought investing was all about.
But that’s not what successful investing is. Like most things in life, investing (and building wealth) comes down to two things – time and consistency. It’s small, consistent actions – perhaps imperceptible at first – that lead to big things over time.
All this is to say that investing isn’t about “playing” the stock market and picking the next Tesla or Amazon or Bitcoin. It’s about grinding it out, day-in and day-out, for years and years.
Learning The Wrong Investing Lessons
I’ve never believed in getting rich quickly. Indeed, I don’t believe anything in life comes quickly. To me, anything worth doing requires putting in the work. It’s all about slow and steady as we work to improve ourselves, our lives, and whatever else we’re trying to do.
The Teslanaires and Bitcoin millionaires didn’t do that. Instead, they hit it big with their one stock, skipping the slow and steady part entirely. It’s great that it worked out for them, but when we see these stories, we start to think that maybe we can do that too.
This warped view of what investing is about isn’t a good thing. Investing is more accessible than it has ever been, and that means we’re in a place where a lot of people can start investing, whether they know what they’re doing or not. Apps like Robinhood and M1 Finance make it so you can buy and sell stocks for free. Robinhood’s app makes investing seem like a game even. With how accessible investing is now, giving people the idea that they too can become millionaires overnight if they just pick the right stocks is not, in my opinion, a healthy thing to promote.
Let’s face it – this is really gambling. You might argue that it’s some sort of educated prediction, but in the end, it’s still a guess. No one can know what the future holds – and especially not what the short-term future holds. If you really could predict how any stock would move, then you could become one of the richest people in the world overnight if you wanted to.
In reality, the Teslanaires and Bitcoin millionaires got lucky (or have been lucky so far). Real investing though – that isn’t about luck. It’s about keeping at it, slow and steady.
Wealth Doesn’t Happen Overnight
Nothing happens overnight. When you see any overnight success, rarely is it actually an overnight success. Sports players may have natural athletic abilities that you and I don’t have. But they don’t reach the highest levels of their sport without putting in the time and the work over the long term.
The same is true with building wealth. Compound interest is one of the great mathematical wonders of the world. But there’s an interesting thing about compound interest – it’s not overnight. It takes time – and a lot of it – before compounding really does something.
And yes, you can win the lottery and become rich overnight. Just like you can pick a winning stock. Or just like you can bet it all on black and hit it big.
The odds just aren’t in your favor to do that. But slow and steady, staying consistent, working day-in and day out. The odds aren’t just in your favor if you take that path. They’re almost guaranteed to be in your favor.
Investing Doesn’t Have To Be Hard
Investing can often seem hard when you think that it’s about doing research and picking winning stocks. People who do this as their full-time job can’t consistently pull this off. If someone who does this as their job can’t pull this off consistently, how can someone picking stocks on the side expect to do it?
So what is investing really about? It’s about picking reasonable investments, sticking with it no matter what, and investing regularly forever. You want a portfolio that makes it more likely than not that you’ll reach your goals. And you don’t tinker with your investments unless you have a good, well thought out reason to do so (and chasing returns usually isn’t a good reason).
Passive index funds are the way most experts would tell you to go. Pick a reasonable allocation of index funds that you’re comfortable with, keep things low cost, and just keep putting money into them every day, week, month – whatever works for you.
You’ll be amazed at what regular consistent amounts can do over the long-term. You may not believe it, but investing $30 per day in well-diversified index funds is likely enough to make you a millionaire over the long-term.
There’s no one right way to invest. But there are a lot of wrong ways to invest. Approaching investing with the mindset that you’ll hit it big if you can just find the right investment is, in my view, the wrong way to invest. That’s not to say it’s impossible to hit it big with something, but if you pull this off, it’s more likely luck than it was skill.
If you’re looking for information on how to start investing, here’s another post I wrote: How To Start Investing: Simple Investing Strategies And Tools Anyone Can Use.