Investing in the stock market can be one of the most powerful ways to build long-term wealth. But looking back to when I first began investing, there are a couple of things I’d rather have understood earlier.
Here’s what I wish I knew back then.
A share is a slice of a real business
Like most newbies, I treated a stock more like a ticker symbol on a screen than a stake in an actual company. But buying a share literally means becoming a part-owner in a real business, with all the risks and potential rewards that come with it.
As billionaire investor Warren Buffett said about himself and his business partner Charlie Munger: “Charlie and I are not stock-pickers; we are business-pickers.”
Buffett’s highlighting something fundamental here. Investing’s about evaluating management quality, the competitive landscape and ultimately, valuation. Stocks are businesses.
Learn about management
Related to this, I wish I’d paid more attention to the people actually running the companies I was buying into. Why does this matter? Because who’s in charge can literally make or break my investment.
Looking back, I didn’t take much interest in this at first, which is pretty strange when I think about it. I mean, imagine someone asks me in a pub to put money into their business. I would ask a number of questions. Is it profitable? What are the growth plans? What type of return might I expect?
But above all else, I’d ask: who are you? I wouldn’t just blindly hand over a wad of cash to anyone and hope for the best. Yet this is what a lot of newbie investors do — and I did myself — when impulsively buying stocks.
Fact is, when I invest in shares, I’m essentially handing my money to the management team and saying, go make us some money. I need to be fully confident they’ve a very good chance of doing this.
Moving money wisely
Putting all this together then, let me highlight a business I’ve recently invested in where I trust the management team and vision for long-term growth.
It’s Wise (LSE: Wise), the fintech company that moves money across borders more quickly and cheaply than traditional banks (who often charge high fees). It believes that “money should work without borders“.
Last year, Wise transferred £145.2bn for 15.6m individuals and businesses, up 23% year on year. Roughly 65% of transactions were completed in under 20 seconds.
This generated underlying income of £1.4bn, up 16%, and pre-tax profit of £282m, up 17%. In a world of cash-burning fintechs, I like that Wise is managing to balance growth with profitability.
The firm’s led by co-founder Kristo Käärmann, who envisions Wise eventually moving trillions. And it continues to make great progress towards this mission, as both Raiffeisen Bank International and UniCredit recently signed deals to launch Wise-powered international payments in their mobile apps.
One risk I see here is a global economic downturn caused by President Trump’s tariffs. This might place pressure on cross-border payment volumes, slowing Wise’s near-term growth.
However, I’m bullish long term, and think the stock’s worth considering. As the world becomes increasingly globalised, more people and businesses will send money across borders. Wise looks well-placed to keep taking market share and grow.
