The Most Important Thing That Counts in Investing


One story from World War II that was as tragic as I found it to be, was that of Anne Frank.

Frank was born in Frankfurt, Germany, but moved to the Netherlands for safety in 1934, five years after birth. When Germany took over the Netherlands, the Frank family hid in their basement with four other Jews.

At the age of thirteen, Anne began writing in a diary of her life, feelings, and the outside world. She wrote in the diary every day for two years until their hiding place was found and she was taken to a concentration camp where she along with her sister died of illness. She was only fifteen years old when she died.

Although Anne was not only a sad girl in this war, her diary which is available to read diary of a young girl Shows the strength of his character. The Diary portrays her as a brave and optimistic girl, character traits that are difficult to manage with the kind of hardship she was a part of.

An entry in his diary reads –

Man’s greatness is not in wealth or power, but in character and goodness.

The strong character that Anne has shown through short life here. And strong character is what makes people great in their life.

In the broader scheme of this universe, even when I look at an insignificant area like investing, I find that investors who have worked wonders for themselves have displayed strong character at various points in their investment lifetime. .

By the way, I’m not talking about people who have done well over the years (thanks to a general market environment) because they haven’t been tested for the strength of their characters yet, but rather about those For people who have stood the test of more than a decade.

The thing about character is that no book or course can teach you on it, although very few of them talk about how you can build it slowly. ben graham wise investor is one of them. Seth Klarman’s margin of safety The second one is. Philip Fisher common stock abnormal profit is the third. And then you have Howard Marx’s memos and Warren Buffett’s letters to shareholders. Most of the other things I’ve written on investing over the years, including this blog, are just commentary.

Anyway, if I draw on the lessons learned from these books and building a strong character needed for successful investors to do well in investing, here are five traits that stand out –

1. Humility, especially intellectual.

Being humble in investing doesn’t mean doubting yourself or believing that you are talentless, intelligent, or unworthy. Conversely, it is about being humble about our own intelligence, questioning whether what we know is actually true and even if we are presented with new information. Our beliefs also have to adjust. In other words, it largely has to do with intellectual Politeness.

As written by Philip Tetlock super forecastingOf course, true humility (in investing) is about recognizing that “…the reality is so complex, that seeing things clearly is a constant struggle when it can be done at all, and therefore protecting human judgment from mistakes.” Must be filled.”

Very few investors have the courage to say, “I don’t know.” But this is how you build humility in your investing process. If you start with “I don’t know,” you’re unlikely to act courageously enough to get into trouble.

2. Integrity, Which is the quality of being honest and having strong principles.

Successful investors focus their investment process with unwavering persistence and honesty, whatever the stock market is doing and others around them are behaving.

They show how, to be a successful investor, you must have a philosophy and a process that you maintain even in tough times. It is very important. If you do not have the courage of your conviction and patience and rigor, you cannot be an investor because you will be driven to fall in line with the consensus by constantly buying at the top and selling at the bottom.

But it’s important to know that no single approach will allow you to profit from all kinds of opportunities in all environments. You should be prepared to not participate in everything that is growing (such as what is happening right now), and only things that suit your process and investment approach.

3. Tenacity, One who is determined to work hard and have faith in their investment process and the power of compounding.

Over the years I have met many investors who knew about the power of compounding, but very few who really understood its true power, because it will not happen in one, three or five years… but ten, fifteen more. Appears in twenty years. And in the age of instant gratification, since many do not have the stamina to maintain their faith in this power and to build wealth in high quality companies, not many investors are successful.

American investor, hedge fund manager and philanthropist Leon Cooperman is quoted as saying –

It doesn’t matter whether you are a sher or a ghazal; You’re better off running when the sun comes up.

Cooperman is talking here about the importance of hard work, which is a direct branch of tenacity. Wise investing is hard work.

But then, Jesse Livermore, one of the greatest stock speculators of all time, is believed to have –

The main reason why you lose money in stock speculation is not because Wall Street is dishonest, but because so many people think you can make money without working for it and the stock exchange is where this miracle can be done.

Warren Buffett has said –

I learned at a very young age how important it is to work hard and be honest.

You work hard to identify the businesses you want to own, and then the hard work you put in is what should help you succeed in your investment efforts. There are no shortcuts at the top.

4. Self-awareness, which is the conscious knowledge of one’s own character and abilities.

George Goodman aka Adam Smith writes in his book money game

If you don’t know who you are, [stock market] An expensive place to explore.

Only the collection of facts and bookish knowledge can lead us to anarchy. It is the chaos that causes most of the people to fail in their investment life despite attending all the books and courses read by them. While it is clearly necessary to read the wisdom and ideas contained in all those great investing books, they will only help us with the “techniques”.

But without understanding ourselves, those techniques will only lead us to despair (perhaps, an ‘intelligent’ despair) and eventual failure.

In studying successful investors over the years, I’ve learned that the right kind of investing education comes with a change of self, which depends entirely on our awareness of ourselves – our attitudes, risk-taking ability, and habits. Is.

When we are aware of ourselves, we are in a better position to behave well. And that can help us protect ourselves from the self-destruction that most other investors are led to.

5. Compatibility, Which is the quality of being able to adjust to new, changing circumstances.

This is the core of Charles Darwin’s theory of evolution.

It is not the strongest of the species to survive, nor the most intelligent of the species that survives. It is he who is most amenable to change.

Adaptability is one of those few skills that are difficult to learn but pay off for the rest of your life.

Given the ever-changing world we live in, and given that change is unlikely to ever slow down, what used to matter a lot (like skills, knowledge, etc.) may not be worth a dime tomorrow. Change used to be slow and incremental: now it is rapid, radical and unpredictable.

Adaptability enables us to adapt to new situations and stay on top of the situation. Of course, this skill is best when paired with insight, which gives us new perspective even before change. Growth depends on how adaptable you are.

Pro. Sanjay Bakshi said this to me in a conversation some time back –

If you have bought the right type of business, there is likely to be a tendency to outperform the business you envisioned. If you see this trend popping up after you invest, don’t do it. Ruined It sticks with the original model. Your model should be compatible. If the performance is much better (or worse) than you envisioned, you’ll need to change the model until the improvement (or the decline is likely to be temporary).

As Keynes used to say, When facts change, I change my mind. You have to have a similar mindset when it comes to investing in both directions. That is, if the business is delivering far worse performance than you previously envisioned, and this performance is likely to continue as the gap is worse, then your original model needs to be reworked and it There may well be a case that you should sell the stock. You should have the ability to detract from the results based on an unbiased analysis of real, meaningful data (not noise).

Combine adaptability with agility in these changing times and as an investor you have the right ingredients for success.

Oh, it takes time!
The thing about character is that it can’t be strengthened quickly (at least not by reading posts like this) and in comfort and calm, but only over time and often during times of crisis and experience of trials and tribulations. I through.

The truth is that the character doesn’t come out often. as a result of crisis, but In A crisis – such as during 2000, 2008 and 2020.

Character comes to the fore even during bad times – such as during 1999 and 2007, and then now, when your humility, integrity and tenacity are tested by the plethora of easy and quick money that you and the investors around you are earning. .

Charlie Chaplin said that the true character of a drunk man is revealed. Well, my advice is to learn your lessons by watching others in the stock market who often get intoxicated by ego, fear, greed and jealousy. Then avoid being like them. Over time, you will build a stronger character.

Source link


Please enter your comment!
Please enter your name here