Unlocking the Key To Building Wealth

Looking for that secret hack to quickly amass wealth? Well, let's cut to the chase - there's no magical shortcut, no secret formula that guarantees instant riches, unless, of course, you can predict next week's lottery numbers.

While this might sound like common sense, it's astonishing how many in the financial industry try to convince you otherwise, often driven by the desire to sell their products or services. The financial press is no exception, constantly bombarding us with market updates and insights to boost their audiences.

When it comes to investing, the legendary Warren Buffett once wisely said, "Investing should be boring, not exciting." In simpler terms, the influential Buddhist monk Thich Nhat Hanh observed that in our modern society, "people are having trouble distinguishing between excitement and happiness."

In 2014, a study led by social psychologist Timothy Wilson at the University of Virginia set out to explore how long individuals could sit alone in a room with just their thoughts. No screens, no distractions—just contemplation. They were told to remain there for anywhere from 6 to 15 minutes, with the only rule being not to fall asleep. There was, however, an option: participants could deliver a mild electric shock to themselves.

The results were quite surprising. An astonishing 66% of men chose to shock themselves, compared to 25% of women. One participant even administered the electric shock to himself a staggering 190 times! In multiple studies, researchers found that people across various demographics despised being left alone with their thoughts, revealing our insatiable urge to constantly engage in activities.

Timothy Wilson concluded that his findings weren't solely a critique of electronic devices or the fast-paced nature of our lives. Rather, they shed light on humanity's persistent need to always be occupied with something, anything, rather than facing our thoughts head-on.

It's truly astonishing that people would rather inflict discomfort upon themselves than be alone with their own reflections.

With the omnipresence of smartphones and social media, it's easy to see how we've become accustomed to instant gratification. Fast-food drive-thrus, ad-free streaming, and one-tap shopping have molded our minds to expect immediate results and fuel impatience.

So, how does all this relate to investing?

Around twelve years ago, I had a conversation with a client. After assessing his retirement projections, I recommended an investment in a well-established company. It was trading at an attractive valuation and had a solid track record of paying dividends for 90 years, often increasing them. His response? "Boring." He preferred to invest in a company he'd heard about on the news, hoping to double his money within two years. Fast forward a dozen years, and the company he wanted to invest in is no more, while the one I suggested is paying higher dividends, and its stock price has more than doubled.

This story isn't meant to imply that I'm infallible or that any advisor is always right. Rather, it illustrates how he passed up an excellent investment simply because it seemed "boring."

So, what's the right investment strategy? It begins with identifying your life goals. If you're planning for retirement, align your investments with those goals, even if they seem unexciting. If your retirement projections show you'll have enough savings to meet your needs, you can consider more "exciting" growth stocks—but only if you fully grasp the associated volatility.

Remember, wealth-building through investments isn't a thrilling rollercoaster ride. It's a steady, methodical journey that starts with careful planning and often boring investments.

Happy planning.