5 Key Investment Lessons to Learn from Billionaire Jeff Bezos

May 3, 2023 Mutual Fund

The other day while I was travelling, I overheard two college students discussing about the founder of the E-commerce giant Amazon – Mr Jeff Bezos. Now, since this e-commerce website is from where most of us shop online for our requirements, from electronic gadgets to apparels, I approached these students and asked them if I could join the conversation as it seemed interesting to me.

One of them said, “We are working on a project in our MBA college and every team in our class has been allotted with each of the top 10 entrepreneurs. Since our topic is exploring the journey of Jeff Bezos and learning about the business strategy he implemented, we are collecting the data for the same.”

To which I responded, “Ohh, that sounds exciting! So what have you discovered about him till now?”

The student replied, “To begin with, Jeff Bezos is renowned for his keen business sense and sensitive knowledge of customer expectations. He revolutionised the world of online shopping with the debut of Amazon.com. Jeff Bezos was adamant about realising his dream of starting his own business. Finally, Amazon was created as a result of a never-ending struggle to create a competent organisation. Bezos had been the CEO of Amazon, but he declared he would stand down from that position in February 2021 and take on the role of executive chairman instead. This was done to ensure complete focus on a number of other projects. Additionally, Jeff Bezos is currently listed as the third wealthiest person in the world on the Forbes Billionaires 2023 list.”

I replied to this, “All right, let me add some facts that might be useful to you. In addition to being an American technology entrepreneur and philanthropist, Jeffery Preston Bezos, better known as Jeff Bezos, is also an individual investor. The enormous empire built by Jeff Bezos took years to develop; instead, it was the result of his strategic decisions and investment choices. His three main investments are Bezos Expeditions, Nash Holdings, and Amazon. Some of his successful investments include The Washington Post, Airbnb, Uber Technologies, and Twitter.

They replied, “Thank you! This is something we were unaware of, now we can enhance our project with to the finest.”

As I waved a goodbye and said All the Best to them, I realised there must be some investment lessons that we can learn from the billionaire investor and an intelligent mind – Jeff Bezos.

Here’s 5 key investing principles I have drafted for your that Jeff Bezos swears by:

1. Build a portfolio that supports your goals

Jeff Bezos is the man the world looks up to when it comes to financial success. He believes in building his own culture that is right for his company to achieve their set organisational goals. Bezos wrote in the 2015 letter, “We never claim that our approach is the right one – just that it’s ours. Over the last two decades, we’ve collected a large group of like-minded people. Folks who find our approach energising and meaningful.” There’s no one set of business approaches that every organisation follows.

Similarly, there is no one size fits all investment strategy that every investor can follow. Each investor is different, and one should build an investment portfolio that is based on their suitability with the risk profile and investment horizon, and that aligns with the envisioned S.M.A.R.T financial goals. Planning your investments smartly is important to accomplish your life goals and lead a secure financial future.

2. Don’t follow the herd

Jeff Bezos believes that although it is important to know what the crowd thinks, it is not necessary to follow the crowd. Conduct relevant research and analysis of what the prevalent thinking is and then come to a conclusion. You will be able to identify whether what the majority is thinking is right or wrong. You can then make a choice and invest to gain more profits.

Instead of succumbing to herd mentality and allowing market fluctuations to influence your decision-making, an investor should examine their investments objectively. Following the crowd in the market is not likely to lead to positive outcomes over the long run. You must carefully evaluate the investments and be aware of the market conditions before making informed investment decisions.

3. Be willing to take risks

Jeff Bezos’ success story includes some mistakes and setbacks. Amazon required three tries to successfully launch its platform for selling and fulfilling orders. But the lesson here is that he was willing to take risks. You have to take risks in your business to reach places where no one else has yet and be willing to discuss your failures too.

You should be willing to take calculated risks when investing rather than making conservative choices. Even if they don’t work out, you will learn something for the next time. You see, high-risk investments may offer the potential to generate higher returns than other investments might produce. However, you need to be careful and involved in high-risk investments only if you can stomach the high risk and not because you are willing to generate high returns. In simple words, you may consider investing in equity markets if you have risk tolerance and don’t just make conservative investments, being scared of the dynamic market conditions.

4. Don’t deviate from your investment philosophy

According to Jeff Bezos, investing should be done with great clarity and focus. He never wanted a small customer base with high profits for Amazon; instead, he wanted a broad customer base with low margins. In addition to earning him significant profits on the company shares he owns, this aids him in attaining the recognition he currently enjoys. If you are clear-headed and focused it will help you successfully research, analyse, and stay on top of market trends.

Jeff Bezos affirms that one should approach investing with much clarity and focus. His aim for Amazon was always to have a large customer base with low margins rather than a low customer base with high margins. This helps him in gaining the recognition he has today while also giving him high returns on the shares he holds in the company.

Do not try to time the market and change your investment philosophy, a disciplined investor knows that market fluctuations are normal and that patience pays off. Stay put until you see any consistent underperformance in your holdings, only then you may think of rebalancing your investment strategy.

5. Plan for the long term

Jeff Bezos surely does believe in holding long-term investments. The importance of concentrating on long-term investments has always been emphasised by some of the finest investors in the world. Consider your investments’ long-term potential before making any. Long-term investments have historically been known to generate higher returns.

However, resist the urge to liquidate your long-term investments due to turbulent market conditions. It takes several years to witness the rise and fall of many businesses. Just like that, it takes various market phases to understand the success of an investment strategy or the performance of a mutual fund scheme. In the short term, your holdings may be in red due to unfavourable market conditions, but this does not conclude they are bad investments.

Macroeconomic events will always influence dynamic market conditions, indicating that the sky is falling and that now is a bad time to invest. Long-term investors, on the other hand, will have the horizon to ride out the downside losses. You must make wise investments in worthy mutual funds with the goal of achieving significant long-term returns.

This article first appeared on PersonalFN here