I see a lot of short-term thinking when it comes to investing.
Either people are looking for digital assets or real estate to get rich overnight.
This type of thinking leads to investors making decisions where they lose more money.
I guess social media convinces these investors that everyone is doing it.
This is the opposite of the top 1% of investors. They tend to think in years, if not decades.
I get it. In my 20s, I had to pay monthly bills, so I needed to keep the real estate flips going.
When you reach the point where those basic needs are met, you need to switch to long-term thinking.
The 3-5 Year Rule and 10,000 hours
So many of my investing conversations include 3-5 years.
Most investments or building of companies require this time frame to get traction or validate a thesis.
Malcolm Gladwell popularized the term 10,000 hours of practice to achieve mastery in a field.
This allows for developing deep expertise and understanding of markets or industries.
It provides enough time for strategies to play out and compound.
It helps investors weather short-term volatility and economic cycles.
Application to Investing
Most successful investments require time to mature and generate significant returns.
New business ventures take 3-5 years to become profitable and establish market presence.
Economic cycles typically last several years, making a longer-term perspective crucial.
Examples are the 18-year real estate cycle and the 4-year crypto cycle.
I have invested in these at the tops and bottoms and learned to navigate from that experience.
While this isn’t an exact science, it gives you an idea of how timing is important.
The Importance of a Thesis and Patience
Patience is key to success as an investor and in the top 1%.
Resist the urge to make impulsive decisions based on short-term market fluctuations.
Stay committed to your thesis unless fundamental factors change.
Use market volatility to reassess and potentially increase position with the highest conviction.
This means double down if there is a big sell-off on your winners with the biggest conviction.
Start with developing a strong investment thesis.
This should be a clear, well-researched rationale for each investment.
Understand the fundamentals of the businesses or assets you’re investing in.
Identify the potential catalysts for growth or value realization.
Action Steps to Take as an Investor
Start by thinking about the 3-5-year strategy, and if you are there, then think about a decade.
Expand your timeframe, and you will realize that the assets you have the most conviction on for a longer period will be of higher quality.
This lets you focus on building wealth over time rather than seeking quick gains.
Only diversify wisely. The bottom 90% often concentrate wealth on a single asset, typically their home.
The top 1% maintains a more balanced approach portfolio across real estate, crypto, stocks, and other assets.
The stock market remains one of the simplest ways to build wealth over the long term.
This will allow market-average gains.
But here lies my strategy for the past and next decades: add some crypto, and now you may look at above-average gains.
Manage your debt carefully if you are in real estate or have a margin account.
Investors always blow up here due to leverage when the market shifts.
They were stretching for extra yields, and this FOMO usually comes near the tops.
Continuously educate yourself in the sector you're investing in and surround yourself with other investors who can share your experience.
One way to do that is to join our community with investors with 10,000 hours of experience.
Last, you must stay disciplined and avoid making emotional decisions during market downturns or periods of underperformance.
Your time should be spent on due diligence, and then, after investing, you should sit on your hands and wait for time to pass.
Again, our community has all you need. Still in doubt? You can check it at no cost for 14 days.
Conclusion
Remember, the path to investment success is rarely linear.
Patience and the 3-5-year rule lead to long-term wealth despite short-term volatility.
As you progress on your investing journey, you’ll find that this approach aligns closely with the top 1%.
They manage their investments, focusing on sustained growth rather than quick wins.
