Success needs long-term focus

A FEW years ago I came across research predicting the world would see its first trillionaire in 2039. More recent figures suggest 2026 could be the year.

Whatever the case, it’s quite a milestone. If you’re not sure, a trillion is one followed by twelve zeros. It’s a lot of money.

Some pundits reckon Microsoft founder Bill Gates could take the title first — or it could be investment guru Warren Buffett, although he’s in his late eighties so age is against him.

Either way, in today’s unsettling climate of sharemarket volatility, it’s easy to assume the time frame to see the first trillionaire could be pushed out. But perhaps not.

The 2019 Billionaires Insights report by UBS confirms that the uber-wealthy share important characteristics.

And when investment markets are taking a bath, it’s worth knowing what sets them apart.

It turns out that the secret to success isn’t all that complicated.

UBS found billionaires shared three common traits: They stuck to a long-term vision, they took smart risks and they had laser-like focus.

There’s plenty that investors can learn from this.

Sticking to a long-term plan is easy when markets are rising. It’s far more challenging when asset values are falling.

But if your long-term vision for your wealth hasn’t changed, why let short-term market behaviour dictate your plans?

History has shown repeatedly that quality assets recover their value, and over time, go on to reach new highs.

Billionaires also take risks, though they are calculated risks. Right now it can be tempting to bail out of shares and put your money into government-guaranteed savings accounts. You’ll have a much less bumpy ride.

However, very low risk means earning very low returns. It’s hard to find a term deposit paying a 12-month fixed rate of 2 per cent in today’s market.

Even though share values have fallen in recent weeks, investors will continue to earn tax-friendly dividends.

As a guide, Qantas will pay an interim dividend of 13.5 cents per share in April. At the time of writing that works out to a yield of 3.3 per cent — still way above what you’ll earn on cash savings.

When markets are volatile, we need to tap into that other characteristic of billionaires — focus.

Block out the noise around what you can’t control, and concentrate on what you do have control over — and that’s the fees associated with your investments. If you can keep this cost down, you are better placed to minimise the impact of uncertain times on your portfolio and your wealth.

Paul Clitheroe is chairman of InvestSMART, chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.