As University students, oftentimes our mindset, at least from what I’ve experienced, extends very little beyond what happens to be on our plate for the week.
Ever since Sunday, for example, an ISDS exam and our first Southeastern Conference game against Auburn have more or less been my main subjects of thought.
To be sure, this isn’t always the case. There are several critical things to be concerned with in the long run, such as graduating, staying healthy and finding a job.
One thing, however, that deserves some long-term food for thought is beginning an education in building wealth, particularly when it comes to investing disposable income in the stock market.
Some may find this notion laughable — we’re all just broke college kids, so why start bothering yourself now with thinking about how and where to invest?
The answer is simple: Time.
Indeed, the fact that, as students, we presumably have our entire life ahead of us puts us at a distinct competitive
advantage against, say, your
typical middle-aged investor.
Basically, if we begin the journey toward smart investment now, the potential for financial gain is tremendous.
Importantly, it doesn’t take an expert to discern between companies that are
“winners” and “losers.”
But before you find yourself tempted to invest in the upcoming Twitter initial public offering or spend copious amounts of time trying to identify the next hot tech company, here are a few suggestions for more surefire ways to become super-wealthy.
Arguably the most important recommendation is to learn from the best.
Undoubtedly, that title belongs to legendary investor Warren Buffett. Nicknamed the “Oracle of Omaha,” Buffett, 83, is widely considered to be the most successful investor of all-time, consistently ranking among the world’s wealthiest people.
Success is great, but the main reason why Buffett is the best guide when it comes to picking stocks is because his investing philosophy is so incredibly simple.
Buffett, for the most part, buys stock in very old companies. Typically, these businesses are in a relatively stable environment and benefit from something Warren calls a “long-term durable competitive advantage.”
More importantly, Buffett only buys companies that he can understand, which is what he likes to call “staying in his circle
of competence.”
What this basically means is a company that has been selling a brand-name product or service for an extensive amount of time, usually over 50 years.
“I look for businesses in which I think I can predict what they’re going to look like in ten to fifteen years’ time. Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people chew gum,” Buffet told former Microsoft CEO Bill Gates in 1998.
If this doesn’t make sense yet, think about it.
The economics of selling a unique, brand-name product or service is crazy good: as Buffett likes to put it, because you “own a piece of the consumer’s mind,” that enables the company to either charge more for their goods or sell more.
Coca-Cola is the perfect example of Buffett’s genius at work.
Coke is a product that has taken over the planet. The company markets more than 100 different beverage products in more than 200 countries throughout the world, and sells, on average, more than 1.6 billion servings of its products everyday.
Buffett started making his first investments in Coca-Cola in 1987, purchasing 200 millions shares for approximately $1.299 billion.
Today, those same 200 million shares have ballooned to a value of approximately $13 billion.
Now, of course mere mortals like us don’t have billions of dollars to work with, but I’d like to wager that if you put a few thousand dollars in Coke today and held the investment for 20 years, you’d have quite a chunk of change.
Here are three other companies with generally similar business models to Coke that Buffett has made billions in profits from: Kraft Foods, Johnson & Johnson and The Washington Post.
All of them are old companies in old industries that generate predictably high returns, so long as you hold them long enough.
In these economically uncertain times, a rich education in how to create wealth for yourself can make all the difference.