Warren Buffett has, yet again, landed in the top five of the world’s richest people, with a massive $117 billion fortune. The billionaire built his wealth on brilliant business decisions and strategic investing, leaving many looking to him for advice on how to invest in stocks. His response is a simple five-word answer: “Invest in the long term.” But the genius of it is that it’s actually about something much bigger than bank accounts.
When used the right way, Buffett’s five-word advice can help you amass success and grow bank accounts–no financial investment required.
Yet many fail to heed Buffett’s advice because they miss one crucial aspect of it–where to go long. Because it isn’t meant to just be a rule of thumb for trading stocks, but a strategy to take stock in life decisions–a way to build lifelong success. In fact, it’s a rule that Buffett lives by. And those who use it to make everyday decisions are those who set themselves up for long-term success.
Let’s take a look at how to invest using Buffett’s advice:
Consider the Allure of Short-Term Rewards Versus Long-Term Goals
The most common reason people find it difficult to follow Buffett’s advice is because, as humans, we have a tendency to be drawn to decisions that have a direct or immediate benefit.
When faced with a decision, the choice with the clearest benefit or quickest reward is typically the most alluring. Psychologically–and subconsciously–our brains are in a battle between short-term rewards and long-term goals, as we are naturally wired to gravitate toward short-term rewards–even if that’s at the expense of long-term goals. Oftentimes, the right choice doesn’t furnish an immediate effect. Instead, it will have a long-term and possibly indirect effect.
To invest in the long term when you make a decision, ask yourself which choice will yield the best long-term results. Are you drawn to one choice over the other because it has a direct or immediate benefit? And will that benefit prove effective in the long term or simply be satisfying in the short term?
There Is Power in Saying Yes
We often hear about the power of saying no and how the most successful leaders and business people are highly discerning with their time. But these are people who have made it. They’re not in the same position as people who are trying to make it.
There’s the idea that to be successful, we need to follow in the footsteps of those at the top. But the fallacy is that instead of looking at how someone got to where they are, we try to mimic where they currently are. However, odds are, they didn’t get where they are by doing the same things they now do.
So while we all need to be conscious of how we spend our time, it’s worth avoiding the path where “no” becomes our default answer. In relation to opportunities, yes or no questions come with short- and long-term benefits. Generally, a “no” yields the short-term benefit of saving time (or energy). Whereas, a “yes” is likely to yield a long-term benefit that may be difficult to see in the present. Even if that benefit is as simple as generating goodwill or the experience that comes with saying yes.
Stay Focused but Not Rigid
Warren Buffett is known to be a buy-and-hold investor, but he’s also a value investor. Meaning that while he does buy on the basis of long-term vision, he’s not necessarily married to holding, and will sell if the time is right.
In other words, while decisions should be based on the future, that doesn’t mean you need to be rigid in your initial convictions. It’s OK to change your mind and make adjustments down the road. In the understanding of this, decisions come with less pressure. And, as the 85 percent rule goes, this comes with the benefit of making decisions easier–if not more effective, which can also increase productivity.
So when making decisions–whether that’s which supplier to use, whom to hire, or making time for someone or even something (e.g., that project you’ve been putting off or that morning meditation you keep saying you’ll do)–ask yourself which choice will better serve you in the long run. By looking at long-term impact, as opposed to short-term gains, you will help make all decisions better decisions. And, with that, you will set yourself up for long-term success.