There is a popular song playing on the radio now that I’ve grown to hate. I’ve heard it over a hundred times and it drives me nuts.
The song is by Meghan Trainor and the title is “All About That Bass.” I’m sure you’ve heard it, a few dozen times by now.
Well, I’ve rewritten this song in my head and have applied it to investing. My new title is…
Wealth, it’s all about that patience.
When you study most self-made millionaires, you’ll notice it takes them, on average, around 20 years to build their wealth. They build their wealth slowly over time learning from their mistakes. This is significantly different than what most people think happens. Most people think these self made millionaires acquired their wealth in just a few years without too much effort.
We have become an “instant-gratification-society” and we expect success and wealth to come quickly, easily, painlessly and without risk.
Nothing could be further from the truth. There are no shortcuts to building wealth. It is a journey and the process of building wealth is the actual reward. The actual wealth built over time is simply icing on the cake. The real payoffs are what we learn, how we grow, and who we meet along the way.
In most of the articles on this website, I’ve tried to show the incredible power of compound interest. Compound interest is truly magical IF you have patience. Your wealth is built one dollar at a time as your money earns more money with each passing year. To truly understand this, you must realize you won’t have your icing on the cake for many years.
This is because all of the benefits that come from compound interest come 30 or 40 years from now. Consider the following from BusinessInsider.com:
Buffett made $60 billion of his $63.3 billion net worth – 95% of his wealth – after his 60 the birthday.
Stop and think about this for a minute, because it is very instructional. 95% of Buffett’s wealth has come after his 60th birthday. Buffett is currently eighty four years old. He started investing at the age of eleven with his first stock purchase. In total, he has been investing for 73 years and the majority (95%) of his wealth has come in the last 24 years.
Is Buffett a “get rich quick” guy? Absolutely not.
Buffett is one of the richest men in the world because he has patiently compounded his investment income for S-E-V-E-N decades. During these seven decades of investing, he has made many mistakes. He has lost significant sums of money on various investments. He learned from each mistake and continued marching forward year-after-year.
Wikipedia defines patience as:
Patience (or forbearing) is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without acting on annoyance/anger in a negative way; or exhibiting forbearance when under strain, especially when faced with longer-term difficulties. Patience is the level of endurance one can take before negativity. It is also used to refer to the character trait of being steadfast.
To be a successful investor, we must be patient for decades. We have to understand that the majority of our wealth will come years from now as our investment income compounds into new income producing assets.
In 2007, Charlie Rose interviewed the actor and comedian Steve Martin. He asked Martin about learning to play the banjo. Here’s what Martin said…
“I thought, if I stay with it, then one day I will have been playing for forty years, and anyone who sticks with something for forty years will be pretty good at it.”
This is patience.
We must continuing playing with wealth for a minimum of forty years until we have it.