Let me tell you a story about the time when a college kid asked Buffett for the #1 advice on how to get rich.
I wish I heard about this story in my teenage year.
How Successful People Make only A Handful of Smart Choices that Make Immense Wealth
Do you find that some successful people made a couple of choices in their lives that turned out to be the best decisions in their life?
It is sort of like a golden opportunity meets preparation.
For example, Elon Musk’s exceptional career can be summarised in a few turning points:
- 1988: Migrating to North America from South Africa for tertiary education
- 1995: Dropping out of Stanford University to build Zip2, his first company.
- 1999: Selling Zip2 and made $22 million, but immediately founding another company, X.com (later became PayPal, and got acquired by eBay)
- 2002: Starting SpaceX
- 2004: Investing in Tesla
- 2008: Becoming Tesla CEO
These are the consequential decisions or the defining moments that Musk had to make and earned him the real-life Ironman fame.
Look back into your life. You shall find some turning points in your life based on some pivot points. Are there any significant decisions that make you who you are today?
To explain my points, one of the decisive change in my life is when my parents moved from a small village north of Baling to Sungai Petani. As a result of their choice, I got to study in a good school and graduated in flying colours. When I received my engineering degree, I opted to be a self-employed musician thinking that I can always fall back to be a fresh engineer. But I never go back after tasting the fruit of freedom.
Now, when it comes to investment, I would like to share this wisdom I learned only in my 30s. I wish I had learnt this in my schooling years – the ’20-Slot Rule’.
The ’20-Slot Rule’ Buffett Taught College Students to Get Extremely Rich
But it is never too late to discover this wisdom that is passed down by the greatest investor of all time. Billionaire Warren Buffett frequently gives college students advice on how to get rich. He preaches that he could:
“Improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches — representing all the investments that you got to make in a lifetime.”
If I tell you this, you don’t have to believe me.
But if a person who no longer needs money, who is honest, famous, reputable, and is known as the number one stock investor of all time said this, you better listen.
Buffett said that “Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”
This ’20-Slot-Rule’ is a concept that doesn’t just apply to smart investments. It also fits other areas of life that demand us to be uncommonly selective.
When is the “Best Time” to Make Huge Investment without Timing the Market?
I am already in my forties. And I had probably used up half of the punch card. Let’s look back in history about the best time to punch a hole: the dips.
In 2002 dot-com crash, I was broke. I just graduated from university with a student loan, and jobless. I was making music and chasing my dream. I was not ready to punch the investment card.
During the 2008 subprime crisis, I was still early in my career. I didn’t invest in any stock. I missed the best timing to punch my card
What did you do then?
Now the bull market is officially over after the Covid-19 pandemic pushed fears to every major economy. China, Europe, the US, Malaysia and nobody is spared.
Isn’t this one of the golden opportunity to throw the punches?
I have been buying my favourite stocks gradually.
How to Overcome Your Fear While The Bottom is Still Unseen
I know it is scary for most people. We are not just afraid of the market tumbling, but we stay home now as much as possible for safety reason. For most people, not only their livelihoods are at stake, their lives are at invisible danger.
If you believe that human being is the most prominent virus breed, we are resilient. We will make a comeback. Life will resume, and the economy will get back stronger than ever.
Be prepared to use your punch card. I get it when people line up to stock up food and toilet papers. You are cautious and might overreact, better than regret. But when superb businesses are at a cheap sale and deep discount, there is no queue. Nobody is scrambling over the stock market. It could be the best time to go for a shopping spree, that might elevate your financial well-being to the next level.
When is the bottom?
I don’t know. Nobody knows. And don’t listen to anybody that tells you they know.
It is too hard for me to foretell the Dow Jones or KLCI in the next six months, two years, or even five years. So I follow Buffett who said that he gave up predicting the market long ago.
But one thing I am pretty sure, when we win the war over coronavirus pandemic, the business will go back to usual. You will come out of your house ad start spending money again.
As my stock investment course partner Peter Lim said,
- Set aside money equivalent to 3-12 months of your expenses as emergencies
- Set aside money for what you absolutely need within the next three year (such as your child’s education fee)
- Invest the sum that you don’t feel regret should market rise 50%-100% when this is over, but not too much until you lose sleep at night.
That’s pretty sound advice.
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