Launching Amazon proved to be one of the most lucrative things Jeff Bezos ever did, but his financial discipline allowed him to grow sustainable wealth instead of losing it all after a few years. The moment some people make more money, they spend more money and don’t advance closer to long-term financial goals.
Bezos’ secret? He constantly reinvested in himself and the company. Bezos could have generated profits with Amazon much earlier, but he set his sights on long-term dominance over short-term profits.
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The tech giant continued to invest in its infrastructure, technology and distribution networks in its early days instead of rewarding investors with high earnings per share. Not everyone was happy with that at the time, but Bezos’ reinvestments allowed Amazon to dominate multiple sectors and produce life-changing returns for early investors.
Here’s how you can apply Bezos’ smartest financial decision to your life.
Don’t Rush To Spend Money
Bezos could have generated profits much sooner, but he reinvested his money instead. While you may not have an Amazon-level corporation, you can still reinvest your profits back into assets that can produce solid returns.
For instance, if you receive a 10% raise, don’t upgrade your lifestyle. You can reinvest the extra money into the stock market or start a small business. Then, you will have a larger nest egg by the time you retire.
Letting money compound over the long run makes it easier to grow your portfolio than if you hold off on reinvestments and start late. It’s better to start now than it is to not start at all, but if you can invest in your 20s and 30s, that’s even better.
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Reinvest Your Money Into the Right Opportunities
Bezos didn’t reinvest his money just for the sake of it. He carefully researched opportunities to determine which ones aligned with Amazon’s objectives. Then, he deployed capital in ways that boosted Amazon’s revenue.
An index fund is one of the easiest ways to get started. Benchmarks like the S&P 500 contain some of the largest publicly traded corporations, and they are diversified across several sectors. However, some investors like to dig deeper and analyze individual stocks that have a chance of outperforming major benchmarks.
Investors should consider where a company is heading instead of what it’s doing right now. Some firms have positioned themselves to capitalize on major industries and tailwinds, like artificial intelligence. Other investments look good now but face headwinds and high valuations that can derail their gains.
Reviewing many investments will give you a better idea of what works for your portfolio and which opportunities make the most sense.
Focus on the Long Term
Bezos regularly keeps the long-term view in perspective instead of treating it as a problem to deal with in the future. You can apply this thinking by writing down long-term financial goals and identifying what actions you will take to reach those goals.
Keeping the long-term in mind can guide your current actions and make you more productive. You’ll feel less inclined to make an impulsive purchase if you know how it will impact your long-term goals.
Jeff Bezos became one of the most successful entrepreneurs by spotting an opportunity and capitalizing on it. However, it required constant reinvestments to stay ahead of the competition and become the top e-commerce platform instead of one choice in a sea of many options.
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This article originally appeared on GOBankingRates.com: The Single Smartest Financial Decision Jeff Bezos’ Made — That You Can Steal
