Wealth Creation With Time on Your Side|ManualTrader

Wealth Creation With Time on Your Side

1952 ManualTrader

Buffett: "If you don’t want to hold a stock for 10 years, it’s best not to hold it for 10 minutes."

Time has always been the enemy of the investor seeking to create wealth. I have a friend who is a world class performer, an incredible driver of personal and professional prestige, but has only retained a portion of his life savings since he was forty. He did manage to create significant wealth during the 1990s, but he certainly did not have the discipline to maintain that wealth over the years. As we know, compound interest was the undoing of his financial freedom ambitions.

What does time represent to you? Do you believe that it represents the time-to-market principle or the compounded interest principle? Most investors believe that time-to-market means the current price of the security being invested in. They believe they get the most value for their money when they invest in safe goods that have a short historical return. This is where compound interest enters the picture.

This investment strategy, in combination with time, creates the greatest potential to create wealth for the long-term investor. Value investing, or buying stocks that pay a high dividend yield, is a part of value investing. This strategy is becoming increasingly popular because the dividends, if maintained, are tax free. It is the part of the investment strategy that Warren Buffet and Peter Lynch, among others, are using to create tremendous wealth.

The value of your portfolio is based on how well your investments are doing relative to the rest of the investment universe. The relative worth of your funds depends on how well capitalized your holding investment is. If all of your funds are simply sitting there in a bank account, like all of the Warren Buffett's had, then your value will be equal to the current price of whatever it is you are buying. If you are able to generate enough cash flow from your investments each year, you can reinvest the profits and purchase new funds, thus multiplying your wealth. If you don't have any reinvestment activity, then the overall value of the portfolio is decreasing.

Value investors are not afraid to invest in safe CDs or bonds for their portfolio. They are not afraid to diversify, like Bill Gates did, by investing in companies that create goods or services that are internationally recognized. They are not afraid to spend a little on advertising or to take out a long-term loan. They don't mind paying a lot in order to get a return on their investment strategy. And, they are able to ride out any market fluctuations because they understand that economic cycles, even recessions, will eventually improve their portfolio value over time.

Warren Buffet and Peter Lynch, among others, understand the importance of time as an investor's best friend. Time is used efficiently in creating wealth by being able to access the world markets at their very best. Investors use time to make buying and selling decisions, taking advantage of the leverage inherent in their portfolio. They don't waste money by paying high premiums for a life insurance policy that has expired due to the fact that no one in the age group they'd like to be at is purchasing the coverage.

There are many other ways to invest to create wealth with time on your side. Some investors create a diversified portfolio of investment vehicles, some focus on one business sector while others invest in another. Others invest a portion of their net worth in the stock market. The bottom line is that investors of all backgrounds, experience levels, and investment objectives can succeed. It all depends on how well a person can learn to manage his or her investment strategy.

A powerful investment strategy is the key to creating wealth. But, time is also essential. Just make sure to manage it so that you can live the lifestyle you've always dreamed of living. The best weapon to create wealth with time on your side is education.

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