Building wealth is 'boring'

Building wealth requires getting used to doing things that are the same and boring over-and-over again for years.

Let’s put ‘boring’ into multiple perspectives for wealth building -

• Compounding

  • It requires going through a long ‘boring’ phase to let compounding do it’s magic.

  • For example - Let’s say we are observing a 10 years cycle for wealth growth, with a certain consistent compounding rate. then 80% of the total gains will come in the last 3 years. But that can’t happen till we hold through the patience for the first 7 years.

• Investing in boring businesses

  • The legendary fund manager Peter Lynch quotes in his book ‘One up on wall street’ - ‘I get excited when a company has a boring name and also does something boring.’

  • A lot of value is hidden in the businesses working in non-hot sectors or with no mention in the media but are fundamentally solid businesses. They could be names you have never heard of but can provide great wealth generating opportunities if timed right.

  • Example - we covered Epack Durables Ltd - a room air-conditioning and components company on 8th Sep. The stock moved +47% in the next 6 trading days.

• Analysing each business in the same boring way

  • When evaluating a potential investment - each business has to be looked at almost the same simple boring factors of fundamentals, financials and timing analysis.

  • There is no room for innovation or being creative in this context. It can be rather counter-productive if we drift away from the simplicity. It’s the only proven way used by hundreds of successful investors and fund managers over decades.

• Holding the stock with patience

  • Once all our capital is invested, there will always be a new stock which would seem more promising. There would be a strong itch to exit the recently purchased stock and buy the new one.

  • Jumping frequently from one stock to other without giving each of them time to go through an expected price movement is a recipe for disaster. No-one can predict when will the stock price move and by how much.

  • If you have been doing SIPs in mutual funds, for atleast 5 years, you would have now realised that the reason they grew so well is because you didn’t touch them and just let them be.

• Staying away from the new/exciting shiny objects

  • There will always be a new ‘talk-of-the-town’ wealth instrument which everyone is talking about, or a ‘whisper stock’ which someone told you about and is slated to become a multi-bagger very soon.

  • Or a get-rich-quick(or poor?) scheme like Future and Options where someone is bragging about there recent quick gains on the social media and how you are missing the bus.

  • Or a new crypto coin in the market which will become 10x in one year and is endorsed by some Ms. X. But you have no clue on why it will become 10x?

• Put the reps everyday even with no immediate gains

  • The analogy of building muscles in a gym applies to successful investing as well. It requires us to keep putting the reps everyday, even though no significant result is visible.

  • Successful investing requires moving from an instant gratification mindset to a slow delayed gratification mindset.

And hence the name, Boring Wealth.