Achieving your financial goals means different things to different people. From ensuring a good education for your kids, a holiday home in Monaco or a brand new Porsche Carrera, investing is ultimately about growing wealth to meet our individual goals.
Achieving financial goals can be wonderful, allowing anyone to live a fuller life with more freedom and opportunity. The truth is that although financial security is something that we all seek, it may seem realistically unattainable to most of us, and turning to provident and pension funds are the only options that we are left with.
Fortunately, there is timeless wisdom shared by the worlds best investors that can help us get there. Aspiring towards a financially free future and a comfortable retirement is one of the main reasons to look at investing in shares. Investing in shares is one of the best means of growing wealth over time. The graph below shows how, $1 invested in 1802 in diversified shares would be worth $704.997 in 2002 whilst holding on to the cash would mean you are effectively left with 5 cents after inflation.
Source: Stocks for the Long Run by Jeremy J. Siegel
The above graph goes a long way to show the advantages of long-term investing in shares and gives a clear indication of the possible growth that you are likely to experience. Staying invested over the long term has historically proven to be very rewarding, especially when looking at the “legends” of investing, Warren Buffett and Charlie Munger. Buffett often talks about the importance of patience with long term investing, “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
But what shares to buy?
Buying shares in companies that own global brands allows you to partner with some of the best global organisations, while earning an annual passive income through dividend payments made to shareholders. Because these companies are global, they are less likely to be affected by local currency fluctuations.
The great part of long term investing is that it requires less effort or time than your day job if done right. Charlie Munger introduced the idea of this new school of investment theory at the Berkshire Hathaway annual meeting in 2000; find a few outstanding companies, buy them, and hold them forever. He calls it “sit on your ass” investing! But just because the approach is simple to understand it does not mean it is easy to do. Finding great companies to buy and hold forever can take a lifetime of research and understanding.
Once your money is invested in a portfolio of quality companies, the money invested will work to create more money through a rise in share price or annual dividend payments. While we are actively able to earn a salary every month, buying shares in a global brand gives you the opportunity to build wealth for everyday living, as well as the future.
Most individuals miss out on the opportunity to grow their wealth because of the fear of losing money and the uninformed notion that investing can be too risky. A really good fund manager is able to mitigate risk and give a potential investor a clear understanding of how an investment portfolio is built and what can be expected over the long-term.
At AXIAM we can assist you with creating a long-term investment plan that is both realistic and expansive, that can assist you on your journey to financial independence. Contact our fund managers to build your investment portfolio.