Investing seems so easy. In 2010 a single Apple stock cost less than $10. If you had bought $10,000 worth of Apple Shares back then, today, it would be worth over $130,000. Seems so simple in hindsight however in practice, investing has been proven to be extremely difficult.

If you can start investing when you are in your early 20s, you should. Ask any great investor, they all wish they started sooner. Though, most people in their 20s are not even thinking about investing. Those that do get started likely do not have the emotional intelligence, patience, or discipline to let their investments grow.

I consider great investors like great pro wrestlers. A lot of wrestlers don’t hit their peak until their mid-late 30s. It typically takes 3-5 years of wrestling experience to even get in the WWE and another 3-5 years to get consistent airtime and opportunities. It is not so much athleticism, as athletes typically peak in their mid-late 20s but developing ring psychology requires years of practice and training.

Most investors in their 20s are intelligent enough to understand the technical aspect of investing. Warren Buffett has said many times that you do not need a high IQ to be a great investor. Being too smart might be a disadvantage in investing because it can cause you to be overconfident in an unpredictable environment. You need emotional intelligence and discipline to be a great investor. Remember, the stock market is an auction-driven market that is driven by human emotion. That’s why you will see stocks priced absurdly low and astonishingly high at times. These inefficiencies are how great investors can become wealthy.

We can reflect on Sir Isaac Newton, who is considered to be one of the most intelligent people in the history of the world, and his investing failure:

“Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he ‘could calculate the motions of the heavenly bodies, but not the madness of the people.’ Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002-2003’s] money. For the rest of his life, he forbade anyone to speak the words ‘South Sea’ in his presence.”

Isaac Newton was a genius, but even he lost millions in the stock market

Humans are emotional beings. Humans often do not know why they make the decisions they make. Often it is based on snap judgments and acting based on faulty intuitive reads. When people see their investments decline by 50, 60, 70, 80, or 90 percent, the majority of people will start panicking. It is basic human nature to want to avoid pain and sell.

That’s why the buy-and-hold strategy is unrealistic for most people, due to faulty human wiring.

To beat the market, you have to divert from the market and think for yourself. There is nothing wrong with cherry-picking other great investors and buying the same stocks they buy. That’s easy. The hard part is to hold onto those investments and stick them out when it drops or to sell them when it seems like it is going to the moon. Investing is a constant process of inquiry. Great investors have to re-wire their brains and become comfortable with uncertainty. As great investor Mohnish Pabrai said, “fear and greed are very much fundamental to the human psyche. As long as humans drive buying and selling decisions in equity markets, pricing will be affected by these fear and greed attributes.”

The key to winning in investing is being emotionally resilient or having a mastery of your emotions. That’s one of the main skills needed to be successful in long-term investing. Believe it or not, the odds of being a successful investor are much better than being a professional athlete, a chess grandmaster, or even a top-ranked poker player. Games like basketball, chess, and even poker require more skill and less luck than investing. Only 0.08 percent of high school athletes will be drafted by an NFL team. Only 0.03 will make it in the NBA. Being a wealthy investor is possible and a realistic goal much more probable than a professional athlete, A-list celebrity, or a mega social-media influencer.

Being a great investor puts you in the minority. Some would call it an exclusive club, but you could also call it a lonely club. 8-9% of adults in the U.S would fit the definition of being considered a millionaire. The more wealth you build up, the more of an outlier you become. Being that wealthy requires you to have a different mindset than the crowd. The great investor is sitting inside a burning building while others are fleeing.

One of the biggest reasons why investing is so difficult is that it puts you in an entrepreneurial mindset, you need to get out of your comfort zone and embrace risk and long-term thinking. You need to take actions that go against what the majority is doing in favor of principled investing strategies. Look at Amazon, which takes much of its revenue and reinvests it into the business. The conventional wisdom is to build a large cash reserve for a rainy day however, a large cash balance is simply eroding over time. Why not use that cash to make your business more valuable? The same principles go with long-term investing.

If you go read Jeff Bezos’ annual letter to shareholders, you can tell he built Amazon like a great long-term investor:

So, if the company is better positioned today than it was a year ago, why is the stock price so much lower than it was a year ago? As the famed investor Benjamin Graham said, ‘‘In the short term, the stock market is a voting machine; in the long term, it’s a weighing machine.’’ Clearly there was a lot of voting going on in the boom year of ’99—and much less weighing. We’re a company that wants to be weighed, and over time, we will be—over the long term, all companies are. In the meantime, we have our heads down working to build a heavier and heavier company.

Amazon’s letter to shareholders in 2000

Investing is an exercise of trying to evaluate a business and a. trying to buy it when it is undervalued and b. hoping its value will appreciate in the future. Seems rather simple however most people don’t even try to do this. They either contribute to a 401K or are passively investing in an index.

If you are investing in a fund, say a random U.S. Large Growth Fund, Apple might be one of the companies inside the portfolio, but it is only 1/296 positions inside the fund. If you really like Apple’s prospects for the next decade, the performance of that individual company has very little to do with the success of that fund. You are not evaluating individual companies, but the long-term prospects of hundreds of large growth companies, or a sector. This type of conservative strategy will net you average results. Better than not investing at all however you are minimizing your risks but capping off your rewards. That is the essence of passive investing, to produce average returns.

The best reasons to invest passively are the reasons to invest actively. You can make a lot of money following an index and netting mediocre returns. The same principles for passive investing are the same for active investing – Time and patience are your best friends. It can make big mistakes look very small over time and make small investments large over time. Many people fear picking the wrong stock; however, I know very few successful investors who only invest in a handful of stocks. Look at investing like drafting the best baseball or football team. In football, you don’t need to have 5 elite quarterbacks on one roster, so you focus on building the best all-around quality team. If you are building a great team, do you sign high school athletes with massive contracts? The answer seems obvious, yet some investors have a portfolio built on risky, unproven unprofitable companies. Much of your portfolio should be made up of quality long-term companies that have proven themselves as long-term fundamentally sound companies.

In summary:

• Ideally, you should be putting up the most money investing when you are young, when time is on your side, however very few people have the traits to commit to it long-term.
• Most young people do not have a lot of money when they start investing and are not conditioned to think exponentially. In investing you can see 10,000% gains. In schooling, the highest test score you can get is 100%. The most you can get for a project is an A+, even if your work merited a higher grade. The modern education system conditions you to follow the crowd and be average, which explains why passive investing is popular.
• Evaluating the value of a business can seem like a fruitless exercise that even the smartest of people are just guessing on. In a 2007 Berkshire shareholders’ annual meeting, Charlie Munger said, “we throw almost all decisions into the too hard pile, and we just sift for a few decisions that we can make that are easy. And that’s a comparative process. And if you’re looking for an ability to correctly value all investments at all times, we can’t help you.” Evaluating a business is a mix of art and science where exact answers are not realistic. You must use your best assumptions and judgments.
• As Buffett has said many times, investing is the process of putting out money today to get more money back at some point in the future. Even though evaluating a company seems impossible, all investors have tools in their favor to become wealthy. Don’t think of investing as predicting the future but as a game of inquiry and thinking.
• Most young investors have time on their side. You also don’t need to be an “A” student to be a great investor. Most investors are wrong more than they are right. A “D” student could make millions investing.
• A risk management strategy implies that you are actually taking risks. If you are not invested at all and all in cash, for example, there are no gains, your cash balance is eroding by 5% due to inflation. If you are not taking enough risk, you are slotted to net mediocre returns.
• Investing is a reflection of you and your financial goals. Some people look at investing as an opportunity to grow generational wealth. Some people look at investing as a sweetener in life, to protect and grow the wealth they already created.