Of the ten wealthiest individuals on the Bloomberg Billionaires Index, all but one are business founders. They have made their fortunes building the companies they founded into some of the most successful operations on the planet. The only exception is Warren Buffett, who is more of an investor than an entrepreneur.
A striking feature of the list is the diversity of sectors. Fortunes have been made in luxury goods, telecommunications, software, electric vehicles, online retail and insurance, to name a few.
This list illustrates why it is so vital for investors to focus on individual businesses rather than investment themes and trends. If a company is well run, knows its niche, and has a competitive advantage, the chances are it will do well.
Investing and risk
One of the most important yet misunderstood principles in the investment world is the principle of risk. Many people define risk as the chance of losing a certain percentage of your money every year. But that’s not risk. That’s volatility.
True risk is the chance of suffering a permanent loss of capital, something investors want to avoid at all costs. Unfortunately, many individuals cannot look past the short-term volatility of the market and they place too much emphasis on volatility as a measure of risk.
This error leads investors down a dangerous path. The best way to reduce volatility is through diversification, but this comes with its own set of challenges.
The more investments I own in a portfolio, the
