In this Video Larry Bates, author of “Beat the Bank” book, and Robin Powell explain how to view the stock market.
RP: There are more books about trading and investing than almost any other subject.
A problem with most of them is that they tend to be written by people who work in the investment industry, and therefore have a vested interest in saying what they do.
An exception is a book like this one. It’s called Beat the Bank, and it’s by Larry Bates – a former investment banker from Toronto.
LB: The three principles of the book are – number one – take some time to learn investment basics. You’ll benefit dramatically from that. Don’t be scared of it; it can be simple. Second is: take a long term view. Be a long-term investor. Be, not a day trader, but a decade trader. Third is: take care to minimise your costs, which can have a big impact on your ultimate returns. Pay for what you need and nothing more.
RP: The good news is that the rules of successful investing are actually very simple.
Spending some time getting to learn them is a hugely valuable investment in itself.
LB: If you take some time to learn the investment basics, you’ll be able to make better decisions, smarter choices, and be a more successful investor by taking some time to learn the basics. Now, the industry sometimes portrays investing as very complex and dangerous, and it really can be relatively simple. In fact – in my view, the simpler the better. That’s actually the main message of my book: take some time to learn the investment basics and you’ll be a smarter investor.
RP: Another important lesson from Beat the Bank is that we need to learn how to use the stock market.
Instead of seeing it as an opportunity to trade or perhaps make a quick killing, we should view it as a way for ordinary people to become long-term business owners.
LB: I see the stock market as a tool for average people, average investors, to become long-term business owners. Long-term business ownership is the greatest wealth creator in the world. That’s how billionaires become billionaires. So if I own shares – or even one share – of Apple or any other stock: well, I actually own that business! It may only be a little slice of it, but I have the same benefits as every other owner. And I don’t have to do anything. I have people working for me every day trying to make money for me; and business owners don’t spend their time watching the market all day long. They don’t worry about that. They worry about building their business over time to create value.
RP: Key to successful investing, then, is not to be distracted by the ups and downs of the stock market.
Fundamentally, investing is about owning businesses, which is a much more reliable way to build wealth in the long run than trading stocks.