An investment decision encompasses much more than taking a stock position, but that is a good place to start.
If you have spent any time evaluating a monetary opportunity, one of the first things that you decided was whether you were entering that opportunity as a trader or an investor. Traders are typically looking at the potential for a short-term gain and the short-term is defined as a few hours up to maybe a few weeks. This is a perfectly legitimate strategy undoubtedly used by thousands, if not millions, of people every day.
In monetary terms, a long-term investment would then be defined as one that is intended to be in place for longer than a few weeks and very possibly without a specific expiration date. Due to the longer period of time, this type of investment requires more thought and strategy to be successful and that is exactly why we’re going to focus on it.
Money and time are often considered the most valuable commodities, and they are often interchangeable in terms of which one occupies the top spot. Considerations involving either deserve careful evaluation, deliberation, and a strong sense of the risks and rewards involved.
Long-term decisions regarding your money and where to invest it are crucial steps you will take as you navigate your way toward financial freedom. Long-term decisions regarding your time are crucial steps you will take as you create a fulfilling and rewarding life. Therefore, the question isn’t whether you should make a long-term investment. It is which long-term investments you should choose.
Of course, short-term investments of money and time will also comprise part of your overall plan and some of those may even directly lead to a long-term commitment. Short-term investments, however, rarely have a meaningful impact on your big picture objectives.
To illustrate this point, I’ll jump back to the stock analogy. There is a reason that financial advisers and investment professionals advise against making a slew of short-term investments. The stock market is notoriously difficult to time with accuracy and impossible to time consistently. If your premise is to invest in stocks on a short-term basis and continually move in and out of positions in accordance with some analysis you have completed or, worse, a hunch you have, consider yourself extremely fortunate if you are right even slightly more than you are wrong.
The same is true for the decisions you make regarding how you will spend your time. If you find that you are often going in different directions or devoting time to a variety of causes and actions without feeling like you are really moving forward, it may be because you have not found a few top priorities to which you can fully devote yourself.
Long-term investments are more complex. They require more evaluation on the front end and much more conviction and commitment throughout the period of time you are invested, whether you are focused on your money or your time or both. Long-term investments require self-discipline and especially patience because the intended reward is often found much further down the road than those you hope to achieve with shorter time horizons and faster payoffs.
Long-term investments require more preparation and stronger habits because the more time or money you put into an investment, the more adversity and unforeseen circumstances you can expect to face.
When you make the decision to invest your money in something, do not count on everything going as planned. Instead, spend time on the front end challenging your thought process and double checking your analysis. Make sure that you think through scenarios that may occur and ensure that you will still feel good about your investment if they do. Think about the worst-case scenario and ask yourself if you are comfortable with that risk. If you decide to go forward with your investment, you will have this exercise to draw from when you find yourself second-guessing your decision down the road. No matter how much time you put in on the front end, something will still happen that will challenge you during the lifespan of the investment, but you will be far less likely to doubt yourself or your decision if you know how much you prepared and that you were ready when the time came.
There are many ways you can invest your time, two of the best examples are in a career and becoming a parent.
Many people are capable of getting a job and working at it. Far fewer have the discipline and foresight to be purposeful in deciding what work they are going to do and if it will form the basis of a meaningful career.
I have observed many people in their working lives and can tell you that there is a 100% correlation between purposeful decision-making and a fulfilling working life. I have had many experiences with people working in many types of roles and can tell instantly whether the person I am working with simply has a job or if they have made a longer-term investment in themselves. Jobs, even higher paying ones, are always less fulfilling and, invariably, if you are working your job without also understanding how that job lines up with you, your personality, and your hopes and dreams, you are also feeling less fulfilled about your purpose in life, or worse, you are not thinking about your purpose in life at all.
Earning a paycheck is noble and important in many ways, but if your work is only a job to you, in monetary terms, you are a short-term trader, not an investor. Sometimes, short-term jobs are necessary to pay the bills, nothing wrong with that, but if that is all you are doing, you will also always be stuck in the short term. If you’re lucky, you’ll get by.
In the short term, many people can become a parent. It is an entirely different decision to become a parent. Parenting, in the long term, involves an all-in commitment to be present, involved, interested, and supportive and this commitment exists no matter the circumstances, or how tired you are, or the number of other priorities you may have. This commitment exists with no finish line. If you are really good at it, you will be right just slightly more than you will be wrong. You will feel stupid. No matter how in-touch you think you are, you will be out-of-touch at least some of the time. Whatever you think devotion is will be re-defined and intensified.
Whether we are talking about money or time, long-term investments tie everything together in your life. Purposeful long-term pursuits present you with great causes and worthwhile endeavors that aren’t possible in the short term. They sharpen your skills and challenge you at the biggest and best levels. They help you to see what is possible when you apply yourself and you exercise the skills that are unique to you.
You get to decide whether you are an investor or simply a trader, whether you are going to make money or you are going to build wealth, or whether you are going to be a parent or a parent.
As always, I hope you choose wisely.
