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Warren Buffett, the world’s most famous investor, is currently worth about $88.5 billion. That’s enough money to buy 29,500 brand-new Bugatti Chirons. Had he purchased these supercars on his 16th birthday (in 1946), and driven a different one each day ever since, he’d still have over 3,000 unused Bugattis. In other words, Buffett is a very, very rich man, and he made his fortune almost entirely from investing.
There may be only one Buffett, but there are millions of successful investors and learning the basics of the trade can be highly beneficial. Personal finance and investing are important for everyone. Across all departments, disciplines and majors, students will benefit from learning the basics of money management. This is because profitable long-term investing creates wealth. With wealth comes freedom — freedom from work, freedom of time, freedom to pursue meaning in our lives. As humans, we naturally desire freedom, which makes the study of wealth and successful investing worthwhile.
Unpacking the fundamental meaning of the word investing is necessary to become an effective investor — something we all can (and should) strive to be.
So what is investing and how can you become an effective investor?
Let’s begin with what investing isn’t. Investing isn’t gambling. It’s not trading rare artifacts with the hope of making big money. Investing isn’t short-term and it’s not fleeting. People often make risky bets (where the downside outweighs the upside) and call these “investments.” These individuals are speculators, similar to those who spend their weekends in the casino looking for a quick win. Speculators gamble their money based on emotion, hype and herd behavior. Many people who bought Bitcoin at $17,000 hoped to sell to somebody else (a “greater fool”) at $20,000 a few weeks later. This is a classic example of speculation and shouldn’t be confused with true investment.
Rather, investing is reaping the rewards of deferred gratification. It’s making use of resources now that will produce more resources in the future. Investing is the foundation of economic development and societal improvement; it’s tangible and measurable, and the benefits can be seen easily in retrospect. All wealth is created through investment.
To illustrate, we will look at the Coca-Cola Company. Those who invested in Coca-Cola stock 30 years ago, and still hold the shares today, have experienced outstanding investment results. They bought the company for its fundamental profit and growth potential, and they’ve been rewarded tremendously. The capital Coke raised from investors 30 years ago has allowed the company to expand its product offering and geographic reach. Investors have obtained wealth, consumers have enjoyed millions of ice-cold beverages, and the company has employed hundreds of thousands of people. It’s a classic win-win-win situation and perfect example of investment success.
Similarly, many small business owners have achieved financial success and provided wealth for their families. Without an investment of time and money, these companies wouldn’t exist, and the security provided from the creation of wealth would vanish.
There are few things more impacting than how we invest our time and money. Understanding the meaning and importance of the word investing is crucial to achieving lifetime goals. Luckily, with some mindful intention, successful investing is well within reach for everyone.