Many investors like to compare equity investing to gambling as if the odds are somewhat similar. But, of course, there is no comparison. The former is the greatest wealth creation tool ever known to mankind and the latter collects money from starry-eyed patrons hoping to hit it big.
In his annual letter to shareholders, Warren Buffett, the world’s most admired (and least imitated) investor, had this to say about his portfolio of equities:
“As I’ve emphasized many times, Charlie and I view Berkshire’s holdings of marketable stocks - at year-end worth $281 billion - as a collection of businesses. We don’t control the operations of those companies, but we do share proportionately in their long-term prosperity.”
This is a useful reminder that we aren’t investing in some random assortment of speculative bets, but businesses owned and run by some of the smartest and most capable people on the planet.
It’s also worth remembering that many of the richest people in the world are owners of businesses. Buffett, Bezos, Gates, and Musk, to name a few are all worth more than $100 billion as a result. And, as Buffett alluded to, that fact is the best illustration of the beauty of the public markets as they offer the opportunity to invest alongside these titans of industry and to financially participate in their genius.
It seems obvious, but these owners/investors don’t typically sell their stakes during periods when prices drop. If anything, they tend to be buyers accumulating more at discounted prices. Many investors struggle to follow suit thanks to the media’s negative influence.
How can we handle the onslaught of media negativity? Having the proper long-term perspective is one way. For example, do you believe that most people wake up with a desire to make their tomorrow brighter than it is today? If so, you have a basis to be a long-term investor.
As Buffett continued,
“Success stories abound throughout America. Since our country’s birth, individuals with an idea, ambition and often just a pittance of capital have succeeded beyond their dreams by creating something new or by improving the customer’s experience with something old.”
As long as this is true and the public markets offer the opportunity to share in the long-term prosperity of the great businesses of our time, staying invested seems to be the most rational approach to wealth accumulation.
Stay the course,
This post is not advice. Please see additional disclaimers.