The Time to Invest

May 2014

Clever people don't call compound interest the 8th Wonder of the World for no reason.<...>

You know me: I talk about red wine - and especially drinking it - quite a bit. Beyond using running as a regular metaphor in my writing, I probably mention my obsession with red wine the most. To give you some context, this quote (and my personal mantra) by Rumi does a great job of explaining how much I value wine:

"As long as I can drink good, red wine, I'll be a rich man."

I have a problem though. Good wine tends to cost quite a bit of money; especially if you're looking to explore older vintages, which is so expensive that it makes it hard to justify a purchase.

What I didn't know when I was younger, was that a chart of how a wine's price increases as it matures looks just like a chart depicting stocks growing at an insane rate. Up and to the right.

Lesson learnt then. Make the investment today, purchase young wines and mature them myself. That means I don't have to fork out ridiculous cash prices in future.

But This isn't About Wine.

After my exit from WooThemes, I have been left with a bit of cash that I need to invest in something that will generate an appropriate return without taking too much risk.

I understand economic basics and the fundamentals of your popular asset classes (stocks, property & cash). I don't pretend to be an expert and instead I think the skill set required to be a great investor is very different to that of being an entrepreneur.

Wealth creation versus wealth maintenance.

Anyway, I've done a lot of reading recently to up my game and enable myself to make a better decision of what to do next. James Altucher's The Ultimate Cheat Sheet For Investing All of Your Money was the one piece of writing that resonated most with me. Not because it was gonna make me an expert on investment, but because I suddenly felt more comfortable making a decision.

In making this decision, I had a similar epiphany as I did about buying red wine: delaying a decision will ultimately be the most expensive option.

I could basically buy any blue-chip stock or property in an established area today, and it should trend up and to the right (in the long-term). It might not be optimized for the best returns, but the return will be positive nonetheless. It also doesn't account for opportunity cost, but that wasn't the aim here.

This is where hindsight is an exact science. We've all heard about friends that bought a property and had a 10x return in 5 years. Or someone we know bought stocks in a company 20 years ago when it cost $2.50. Today that stock is worth $100.

We then say things like "that investment was such a bargain at the time" and we ignore the fact that we have the same opportunity today. No - we can't buy that stock for $2.50 anymore, but it also shouldn't be worth only $100 in another 20 years' time either.

This is also exactly why any financial planner will call compound interest the 8th Wonder of the World. And they'll talk about it as if it's such a secret. It isn't really, yet we forget it often.

Lesson learnt again then. In the long-term, most things I invest in today will grow in value. The sooner I start, the better.

But Wait Once Again, This isn't About Financial Investing Either.

Mostly because I'm probably the last person you should listen to about investments. (You're much better off listening to me talk about red wine for example.)

What I'm getting at is that this is a mindset that we can apply in most of the things that we do on a daily basis. This is now something I ask myself regularly:

"What can I prioritize and do today to make an investment in something that will grow in long-term value?"

And I have some examples / ideas for you too...

All of these are passive or soft assets. It might not be worth much today, but compounded over time, all of them become incredibly valuable.

Time is the one thing that never stops and it doesn't allow us to rewind, reboot and try again. There is only today.

The (investment) decisions you make today is the thing that shapes your tomorrow.

What can you prioritize and do today to make an investment in something that will grow in long-term value?

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