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I recently published a couple of Twitter threads sharing some key lessons (in my view) that young and old (experienced) investors can practice to do well in their investing.
The lists are not exhaustive, but contain some of the most important lessons that, if you practice, may help you survive the tough times in the market.
Here are those lessons.
Lessons for New Investors
1. Investing is not risky for the reasons (like volatility) it is made out to be the jargon-filled analysts, fund managers, and other market experts.
Investing is risky if you do not understand what you are getting into and why. In fact, not investing well is a greater risk.
2. You do not need a upper IQ to do well as an investor. In fact, the biggest financial crises have been caused by the highest IQ people.
What you need is good EQ (like impulse control) so as to minimise the mistakes of bad behaviour that causes investors to make big mistakes.
3. To wilt a decently good investor, you don’t need to spend 5-6 or increasingly hours per week worrying well-nigh your stocks or other investments. There are largest things to do in life.
Become well educated well-nigh your investments ‘before’ you make them, and then let the wheel roll.
4. Investing is NOT well-nigh vibration the market or your colleague, neighbour, or enemy.
Your main task as an investor should be to protect your wanted over the long term and write-up ‘inflation’, so you are worldly-wise to maintain or grow your purchasing power and meet your financial goals.
5. Unlike what stock market sociology may have led you to believe, upper risk does not equal upper return.
When you buy good investments at reasonable prices – and you know that well – you are taking low risks that should set you up for reasonably upper returns.
6. Legendary investor Sir John Templeton said, “The four most dangerous words in investing are ‘This time it’s different.’”
It is ‘never’ different. Booms and busts happen in scrutinizingly the same way, and investors lose money when
they start yoyo that ‘this time it’s different’.
7. ‘Diversification is for losers, you must concentrate,’ is an translating I received in the early part of my career.
It is bad translating for most new investors. Concentration can make you big money, but has huge risks that only unfurl with time.
Diversify enough. Not too much.
8. You are likely to succeed as an investor not just by the stocks you own, but increasingly importantly by the ones you don’t.
Create portfolios like a museum curator (choose well), not a warehouse manager (choose everything).
12-15 stocks and 3-5 funds are enough. You don’t need more.
9. What you need to succeed as an investor is self-sustaining thinking.
Remember, you vacated are the most capable person working to manage your money. It’s upper time you start yoyo this.
Educate yourself well. Then segregate your investments well.
Lessons for Old (Experienced) Investors
1. Just stuff in the markets for 15-20 years does not midpoint you have known and seen everything that is there to see in investing. Markets will protract to prepare some really tough question papers for you. Don’t get unprotected napping.
2. You may have gotten one prediction right in the last 20 years. This does not make you an expert in predicting, expressly the future.
So, stop predicting and seeking predictions. Just alimony preparing for the rough times coming your way (and they will).
3. The weightier of investors have not been worldly-wise to master their emotions. So, if you think you have hope, think again.
We are not rational beings, plane if economics text books seem we are. And so, the weightier hope you have is to minimize mistakes of emotions, not eliminate them.
4. One unscratched way to stave rhadamanthine an emotional fool from time to time is to have a ‘process’ that suits you, and a sound checklist that takes yonder some weight from your mind and helps automate a large part of your visualization making.
So, have a process. Then, have faith in it.
5. Experience does not guarantee that you understand the complexity of the markets and its participants. A powerful remedy versus the complexity of markets is the simplicity with which you should invest.
“Keep it simple” is good translating for kids, and for grown up kids too.
6. Stop consuming media, plane if the vise looks handsome or beautiful, or sounds smart. Most of it is noise. Since you often do not know what isn’t, you are largest off completely lamister it.
Believe me, life is happier lamister media, and investment decisions saner.
7. With ~20 years in the market, you must be in your 40s or 50s. Your soul is not fit unbearable to handle much stress. So, please do not stress out watching the stock ticker minute by minute, and causing your heart to miss beats.
You anyways don’t tenancy the ticker. Accept this.
8. You may have piled unbearable in the first 40 years of your life. Now is the time to subtract.
Subtract negative people, a lot of useless stuff, useless stocks, useless advice, and useless practices from your life.
Focus on what’s enduring. Leave the unnoticeable out.
9. Legendary investor Howard Marks says, “There are old investors, and there are unvigilant investors, but there are no old unvigilant investors.”
Remember this. In unconfined likelihood, if you alimony vicarial bold, you may never reach your old. The mind and soul have their limits. Know that.
10. Spend less and less time in the stock market, and increasingly time outside of it. Maybe, add philosophy and spirituality to your life. Learn art. Read old books. Learn to write. Start a diary.
Do anything instead of keeping a unvarying focus on your stocks, portfolio, and net worth.
11. Do what Kurt Vonnegut said “makes your soul grow.”
Invest well just to reach that stage of life, if you are still not there.
Believe me, it’s a trappy feeling when you are there.
If you are still reading, thank you for your time.
And congratulations! You have an sustentation span much longer than an stereotype human living today.
That’s all from me for today.
If you know some young and old investors who may goody from today’s post, please share with them.
P.S. Check out the Safal Niveshak Prime Membership and unlock wangle to sectional members-only content, special ebooks, transcripts of my podcasts, notes from the books and other timeless resources I am reading, curated content that I am consuming and learning from week without week, and special members-only unbelieve on my other courses and books.
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