Have you tried to talk to very successful investors and wondered why you are getting very generic answers? The reason is that there are very few investors anywhere who will talk in details about the investment strategy that they adopt. Investment is about the market reality and there are lot of market realities that might actually make you uncomfortable. Most successful investors have an aura of invincibility that is built around them by the media. They may not be too keen to have this halo vanishing. Let us look at a few basic truths about the market which a lot of successful investors will not be willing to share with you. While you may not really get any Indian share market secrets or investment secrets to gain wealth, here are a few successful investment tips and tricks to know.
How many times they fail before succeeding
This is hardest to get out of most successful investors and you too would have noticed this. But you can take it for granted that most investors have made some awful mistakes and have incurred huge losses before they had this aura built around them. At one point the legendary Ray Dalios lost all his money and had to start from scratch all over. The great trader, Jesse Livermore, went bankrupt many times over. But what actually sustains these successful investors is just the perseverance. The see their share of failures too!
What is their methodology for picking stocks?
It is almost impossible to make a successful investor talk about their investment strategy with a great degree of detailing. Most of them, including the likes of Warren Buffett and Peter Lynch, will be more than willing to give you broad tips and market wisdom. They are also willing to talk about their broad investment philosophy. But, the moment you get into detailing their specific strategies, you are unlikely to get very specific answers.
They missed many multi baggers along the way
Even the best of investors find it hard to lay their hands of too many multi-baggers. For example, Warren Buffett missed out some of the biggest value creators in the US market like Google, Amazon and Facebook. Even his purchase of Apple happened pretty late in the day. Great investors also struggle to find multi baggers and if you believe that they only pick value creators then you are sadly mistaken. Of course, not too many investors will tell you the same.
Investing is not everyone’s cup of tea
Investing sounds quite simple since you just need to identify a good stock and hold tight over the long term. If that was the case, then there will be scores of Warren Buffets around the world. The truth is that investing is not everybody’s cup of tea. You not only require the analytical skills and the market understanding but also the mental make-up and the internal conviction to play the market. These are rare qualities and therefore the vast majority should still prefer the passive approach of equity mutual funds. Equity investing may look very compelling, but is really not for all.
More often than not, markets go against you
For the best of investors, the markets rarely work in their favour. It is not like the markets conspire to work in favour of good investors. The rare quality in successful investors, which few will talk about, is an uncanny ability to fish in troubled waters. They are like Tudor Jones who risked his capital buying stocks on Black Monday in 1987 or John Paulson who made billions betting against the sub-prime assets in 2007. Successful investors make their money in a handful of big calibrated risks. They just make the best of bad markets.
Discipline matters more than skill in the markets. Even luck plays a part
It is said that “Investing is 40% luck, 40% discipline and just 20% skill”. Of course, you should never attempt investing if you don’t have that 20% but that is a different matter. The point is that apart from being skilled, great investors have also been substantially disciplined and also substantially lucky. This may not be too obvious if you listen to the wisdom of investors but this always is there beneath.
How investing is a lonely, dry and boring job
If you look at the investment world from outside, it looks like an exciting world of investment mavericks that have the Midas touch to convert paper into gold. That is hardly the case. Investing is actually an elaborate, dry and very monotonous job. Before you arrive at one good investment idea or potential multi bagger, you may have to reject nearly 100 ideas. That is how difficult it is to find a good stock
The best of investors have actually made it to the top because they never gave up. That is hardly exciting but that is what differentiates a moderate investor from a successful investor.