The biggest impediment to long-term wealth creation is your desire to get rich as quickly as possible.
You are going to run into people that got rich quickly by taking a lot of risk. Most of them know they got lucky, and unfortunately many of them lose it all. Why is that? Because their luck took them to a place that their character and process couldn’t keep them.
Unfortunately most microcap investors are attracted to high risk situations and the wrong leaders. Many investors like to be sold. They like big bold short-term catalysts and promises. Most microcap investors would rather have a 5% shot at a 500% return in the next in 6 months rather than a 85% chance at a 100% return in the next 36 months.
I get caught up in it as well. For me, it’s when I’m down in an investment or have lost money in an investment. It’s human nature when you lose money quickly you want to make it back twice as quick. Don’t make a bad decision compound.
Here is a question that helps refocus me on what is important:
Where can I conservatively double my money in 3-years?
This might sound boring to most microcap investors. It isn’t.
If you double your money in 3-years it is a 26% compounded annual return. If you can do that over the long-term you are one of the best investors on the planet.
A big misperception is when people think “multi-bagger” means ascending quickly in a short period of time. Just like a fine wine, they often take their time to mature and develop.
In a previous article I wrote, We investors are such fickle creatures. Immediately after we are done buying a position, our enthusiasm starts to fade. We would have cursed the stock if it would have moved higher as we bought our position, but now that we are done buying, we curse it for not immediately moving higher.
When you feel yourself getting impatient, slow down, recalibrate and ask yourself:
Am I still in positioned in investments that can conservatively double in 3-years?
Instead of focusing on where you can make 500% in the next 6 months, invert that and find situations where you can’t lose over the next few years. The latter is often times where you will find the next great winner.
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