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Money and mind. Many chase returns, few the mindset that makes long-term prosperity possible in the first place. Today we'll discuss how to invest for the long term and how to make decisions that make sense for both your life and your portfolio . Based on and supported by ideas from Charlie Manga, arguably one of the best investors of all time.
Imagine your life gives you a decision card with 20 punched-out options. Each individual punching operation represents an investment opportunity. We often believe that we have an infinite number of financial opportunities, but that's not true. A house, a business, a big financial decision. It's usually not much more than that.
When you truly realize how rare these big, important decisions are, you stop gambling and speculating and instead make sustainable decisions with consistency and perseverance. Great wealth is not created through many small maneuvers, but through well-considered decisions that you can stand behind in the long term.
Therefore, it is worthwhile to really think through the decision deeply before making it. And I've definitely prepared a couple of thoughts on that for you today. It doesn't matter how large your area of expertise is. The only important thing is that you know your limits. The greatest protection when investing is not knowledge, but honesty.
Honesty about what you truly understand and what you don't. And if you learned about crypto through social media , but you know a lot about stocks, then stocks are your area of expertise. Point. Many people ruin their money by investing in fields with only a superficial understanding. Investing doesn't mean participating in everything.
Investing means putting your money exactly where you have a deep understanding. Investing means only trading where you can realistically assess the future. Throughout my life, I've been repeatedly asked by investors and friends why I don't invest in real estate . I could save on taxes, I could use borrowed capital , but I understand little about the construction, maintenance, and life cycles of a property.
I do n't know where it's correct and, to be honest, I have no interest in looking into it further . On the other hand, I founded and sold my own companies . I have learned to invest in companies that I understand more deeply and to absorb more of good entrepreneurship. The books I read are about stocks and great entrepreneurs of the past.
I am learning from history about precisely this area. This is my area of expertise, which I am reluctant to leave . But no matter what field you work in, there is always a clear perspective. The value of an investment is the sum of the future cash flows expected from it. And that's exactly how it is with companies.
I need to have an expectation of what cash flows will return in the future. Most people invest in mood, not in value. But an investment is simply something where I spend money today in order to get more back in the future, with solid security. Everything else is speculation. The three crucial questions are therefore: How much money will be returned?
When will it come back? And how safe is it? If I cannot fully answer these questions , it is not an investment, but hope. If you spend €50 today and get €60 back in the future, that 's an investment. If I have a car for normal use, I experience depreciation and it's a normal expense. If I buy art without having any interest in or knowledge of it, and cannot predict the value development of different artists , then it is speculation.
And once you understand everything, you'll be surprised by the most common mistakes. The biggest mistake is not the wrong decision , but the missed opportunity. In retrospect, most people don't regret the stocks they bought, but rather the ones they didn't buy, even though they understood everything.
The stock you analyzed but didn't buy due to fear or other reasons. the business opportunity you sensed but postponed. Missed opportunities don't appear in any balance sheet, but at the end of life they often have a greater impact on success and happiness than decisions made with mistakes . And older people often describe their regret that they did not nurture relationships, that they let opportunities slip by.
All these things are nowhere in sight, they do n't attract attention, but they have an effect. And even among those well-thought-out decisions, one in ten may still be a mistake. Yes, and looking at that, usually only one in ten is a truly serious, somewhat more fatal mistake. 1% of all good decisions go wrong, and that's something we should think about, about making better use of opportunities.
And yet we can still get better at distinguishing between opportunities. Manga says: Time enhances quality and exposes mediocrity. It is much better to buy a great company at a fair price than a bad or mediocre company at a bargain price. Mediocrity is expensive because it costs you time. Time during which no further development takes place in your portfolio.
Time you spend analyzing mediocre companies without making any progress. A truly good company becomes more and more valuable over years and decades, even if the initial price was somewhat high . A bad company will fall apart piece by piece even in good market phases, even if the price was cheap. That's why it's so important that we set quality criteria .
And I observe this time and again with the analysts at Alphastar, such as ongoing cash flow, increasing profitability, low debt ratio, and a high level of involvement from the CEO, who strives for consistent behavior towards success over 10, 20, 30 years . These are values that lead to this higher quality.
and to think about how we can increasingly cultivate such security. This is one of the biggest levers for investors. And then it's important to remember: Investing is not a test of intelligence. Long-term success in the markets is hardly determined by intelligence , but much more by our own temperament, which we bring to the market .
When everyone is panicking and selling, you need calm. When everyone becomes greedy, you need distance. The person who is of average intelligence but emotionally stable will almost always beat the person who is brilliant but impulsive. Investing means knowing your own psychology, not just predicting the market.
Anyone who sold under the Corona law, for example, lost. Those who remained calm and perhaps even bought more shares won. Falling prices and even slight red indicators cause some investors to panic. I've already made some videos about this , which I'd be happy to link to you, and it's really important to learn how to regulate your nervous system in order to maintain a Klan head in every situation.
And I would like to share three more ideas for inner thinking, for this self- leadership, which have significantly shaped my own thinking and behavior . And I'm sure they can trigger something in you too , if you pay attention. And perhaps they might even be inspired to comment on what you took away.
First and foremost, I would like to point out that decisions change one's behavior, not just the thoughts about them. We see this in people who are frustrated at work, as in the current Indit study, which shows that 43.8% of Germans hate their job, not just dislike it, but find it terrible, and are in this situation and cannot change their behavior or their situation, and therefore their circumstances do not change.
Because work is just one example of many ways to change one's own experience , to take different paths in difficult situations than before, and not just to repeatedly find out in a thought cycle how bad it is and thereby get into more difficult situations . And I know some people have a very hard time and it seems like they can't change anything.
But without personal change, without changing one's own behavior, nothing is guaranteed to change. I have learned for myself that any thought about better behavior, about good conduct in this world, is interesting, but only the actual willingness to change something and to start right now , to be a different person , really ensures that I actually do something.
Secondly, I would like to talk about habits as a form of psychological compound interest. For investors, it is absolutely essential to educate themselves daily or regularly. As a habit, I find it acceptable to read a book about finance, old entrepreneurs, and successful companies of the past for at least 5 or 10 minutes.
And many people then say, it's pointless to spend just 10 or 15 minutes, so I'd rather not do it. But the regular repetition shows that an incredibly large number of hours accumulate. And I know how hard it is to carve out that time . And I myself had a baby a few months ago and realized how little time is left for studying, so I cut out many things in my life to ensure I have those one to two hours a day to read and anchor what I've read through journaling and similar methods, because I know that over the course of a year this creates 500 hours of study time that others do n't have.
And I conducted a survey among other entrepreneurs and executives about how much they learn, and almost none of them reach 500 hours per year. I would like to invite you to see that even small steps, through the compounding effect of time, lead to big changes in which you learn by taking something with you, and a new impulse, something new read each day ensures that you can process this information and learn from it in the other phases of the day as well .
Take it seriously to become a better investor. And as a third thought, an excellent idea from Charlie Mange, who asked students: If you could, from whom would you buy a 10% share of their life ? And people sought out individuals with integrity, trustworthiness and composure, people who were obviously moving in a wonderful direction with a sense of purpose .
And it was somewhat sad to see that they weren't that person themselves. This is a call to action and a reminder to consider whom you would choose, why you don't have those qualities, and how you can ensure that you gradually acquire these qualities, perhaps from now on or in the near future, because that is your role model, and the investment in yourself to become that role model with those qualities is what is most valuable.
Investing and living follow the same principles. You need a nautical chart, your authority, a compass, your decision, a sturdy hull, your integrity, and habits. The ocean is not an enemy. He just checks regularly to make sure you know where you're sailing. And I would be happy if we could sail together in the future to one or two more videos here on this channel. Thank you. Thanks heard.
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