A young investor’s guide to avoiding the get-rich-quick trap

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In the course of my interactions with young investors, many ask this question: “What do you think about the idea of ​​trading stocks initially to build capital and then investing that capital for the long term?

I ask, “Why do you want to do this?”

The answer is often, “So I can quickly build capital for long-term investing and get rich quick.”

Then I ask, “Why are you in such a hurry?”

The next question rarely comes up because most of these young investors are not really sure why they are in a rush or should be in a rush to get rich quick through stock market investing. They’ve just seen others do it—trading to build capital and then investing that capital to get rich quick—so they want to do it themselves.

As I have come to understand from my basic study of the psyche of new, young investors over the years, I think the heart of this question lies not in its financial implications, but rather in the underlying psychology that drives it.

The desire to accumulate wealth quickly is not just a strategy, but a mindset. The allure of getting rich quick is undeniably strong, especially at a time when stories of millionaires and market wizards dominate the headlines or social media and beyond.

For young investors, these stories create a distorted perception of investing as a fast track to financial independence. However, this fascination overlooks the inherent risks and discipline required in creating wealth.

Trading stocks to generate quick capital is like walking through a minefield blindfolded. The stock market, inherently volatile and unpredictable and often humiliating, is not a guaranteed fast track to riches. It requires not only an understanding of market and business dynamics, but also a good idea of ​​what kind of investor you are, the risks you can take, and the ones that can kill you financially.

Charlie Munger said, “The desire to get rich quick is quite dangerous.” The harsh truth is that this get-rich-quick approach often leads to significant losses, especially for those who lack experience and emotional control.

Contrasted with the dangerous path of rapid wealth accumulation is the philosophy of long-term investing. This approach is consistent with the principles of successful investors such as Warren Buffett and Munger himself.

This idea of ​​slow, long-term investing is based on the power of compounding (which is back-ended, meaning its fruits only appear over time and never quickly), understanding market cycles and patience. It’s about building wealth sustainably through disciplined investments in fundamentally strong businesses or stocks and allowing time to work in your favor over the long term.

The urge to get rich often stems from societal pressures, personal aspirations, or misconceptions about financial success. Because of this, it is crucial for young investors to introspect and understand their motivations. Is the societal celebration of wealth, peer pressure, or lack of financial literacy the cause of this rush? Recognizing these factors is the first step to adopting a more rational approach to investing.

The constant warnings of Charlie and other similar investors about the dangers of getting rich quick from the stock market are not just financial advice, but a beacon of wisdom. It emphasizes the importance of caution, patience and education in investing.

The path to wealth should be pursued with a clear understanding of one’s abilities and goals, tolerance for risk, and a commitment to continuous learning, not the lure of getting rich quick, which often disappears as quickly as it appears.

The heart of the matter is that while the idea of ​​trading stocks to quickly generate capital for long-term investment may seem appealing, it is fraught with risk and often stems from a misguided urge to accelerate wealth accumulation.

The wisdom imparted by experienced investors should serve as a guide as to why you shouldn’t because you shouldn’t be in a rush to get rich.

Adopting a balanced approach that combines the virtues of patience, education and disciplined long-term investing is the key to not only building wealth, but also maintaining it.

So, if you are a new and young investor, keep in mind that the journey is not only about the goal of wealth, but also about learning, experience and growth. And as the cliché goes, it’s important to remember that creating wealth is a marathon, not a sprint.

Finally, this Kabir Das quote is what you need to remember and apply because it is what really works, wealth creation and otherwise –

slowly slowly, slowly

माली सीन्चे सु गडा, ॠतु आई फल होय।

Things happen slowly, in their own sweet time. Even if the gardener pours hundreds of pots on the plant, its fruits will appear only when the season is right. Never before.

Thank you for understanding.

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