If you want to be a successful investor for the long run you should strongly believe in the following principles from the bottom of your heart.When I say believe I mean 100% there should not be any wavering on your part when you see market correct by 4% last week. It is always easy to believe in your theory when market agrees with you but is difficult when you see high volatility in the market and when the stocks you own drop by 10% in a single day. If you believe strongly in the principles below then you can stand strong and hold your position. Without further delay here are the principles:
- World will be a better place in the future: You need to be an optimist and believe world will be a better place tomorrow than today. There are budget deficits across most of the developed world now that may make you doubt this but you should believe that the living standards of human kind will improve in the long run.
- Believe in Capitalism: You should believe that democracy will spread over the world and with it more countries will embrace capitalism. This means world class companies will be able to create products and services that will make our life better and will be able to sell them for a profit.
- It is a border less world: If you believe that world will be a better place and world class companies will help us live a better life then the next leap is that there are no borders for these world class companies. You already see for many for the top100 companies in USA most of their revenues come from around the world. They are present in most of the developing countries and frontier markets and sell products around the world. You cannot pin these companies to a region. If you own Coca Cola it does not mean you own a US company you really are owning a global company. Similarly Nestle is not a Swiss company but a global company. So if you these world class companies you need not have to worry about diversification around the world because the company gets revenue all around the world.
First you should get used these basic principles and be comfortable with it. In the next post I will go through some of the investing principles.