I just Googled “Warren Buffett Books”. Warren Buffett is considered to be the greatest investor ever. He bought his first stock at the age of 11. He’s 89 years old right now. That means that he has been investing for 78 years. His net worth is about 80 billion dollars. During all this time he has become a master in investing psychology.

I got over 50 results. I have read some of those books already. Most of those books talk about how Warren Buffett is a value investor. They talk about how he does his research, how he picks stocks, so on and so forth. 

But there is something the books don’t mention. That no one can replicate his success, because practically no one can stay invested for 78 years. 

In fact, Warren owes the biggest part of his success, not to his smarts but to his patience. He buys boring companies and holds them for a long time. 

Some examples are:

• Coca Cola: 32 years. 
• Wells Fargo: 30 years
• American Express: 27 years

His portfolio is public. Anyone can copy it. But very few of us are willing to wait that long to see our investment grow. 

The thing is that money doesn’t grow linearly. Money grows exponentially. Everyone wants the secret formula. The get rich scheme. But when presented with the real secret, the real formula, very few people want to follow it. 

How to apply investing psychology to our lives

The medium income for a single person in Canada is $33,000. 

If that person invested 20% of salary every year, that’s 6,600. At a return of 6%, that person would have one million dollars after 39 years. 

Nothing extraordinary. The amount of money $6,600 is not huge. The  return is not huge either. 6%. But the creation of one million dollars would be real. 

If that person wanted to have a second million, she would have to wait another 10 years. 

Here we begin to see the magic of compounding. The first million took 39 years. But the second million only took 10 years. 

If that person wanted yet one more million, she would have to wait 7 more years. And thus, every additional million takes less and less time to get. 

How the Canadian government is helping with our investing psychology

Right now. The Canadian government is allowing us to save, tax-free, in our Tax-Free Savings Accounts, $6,000 per year. 

The skills are very simple. Buy an index fund, invest the maximum of your TFSA every year, and in less than 40 years, you too, you will be a millionaire. But we still have the psychological barrier overcome. We procrastinate. We don’t understand the secret formula of being patient and waiting. We leave it for later, and we let that opportunity slip by our fingers. 

Jack Bogle, one of my Financial heroes once said. “Don’t do something. Just stand there.”

Capitalism is not broken, but it needs time

Capitalism is not broken. It’s misunderstood. Almost all of us here have the capacity to earn about 30,000 and thus the ability to invest $6,000 per year. But are we willing to add the secret ingredient? To let your money sit there and do nothing? I am not sure about that. 

And thus it’s my belief that making money is 90% psychological and 10% technical.  

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