I subscribe to a website called brainpickings.org that is a beautifully curated set of articles about books on a variety of life topics. I’ve come across many excellent reading suggestions from this treasure trove. A couple of years ago, the founder of the site, Maria Popova, wrote a post called “7 things I learned, in 7 years of reading, writing, and living“. As I read through the learnings, it occurred to me how relevant they are even to something as material as wealth and its pursuit.
So, borrowing heavily from Maria’s article, here are the Seven life learnings for investors, for the worthy endeavour of building long term wealth.
7. Do nothing for prestige or status or money or approval alone
“Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. It causes you to work not on what you like, but what you’d like to like.” – Paul Graham
Seemingly antithetical, but if the idea of making a ton of money is the only thing that drives you as an investor, there’s a good chance you won’t succeed. Because, in a probabilistic system like investing, even a bad process can result in good results, up to a point. The investor solely focused on the money won’t spend enough time improving her process, thereby jeopardizing long term performance. Same goes for wanting bragging rights about your latest 50-bagger to make your case for the “investing hall of fame“. The pursuit of that “party headline-grabbing stock” could do all kinds of damage to your portfolio.
6. Be generous
“…with your time, your resources and with giving credit and, especially, with your words, It’s so much easier being a critic than a celebrator.”
There is no distinguished club for “most annual reports analyzed” or a wikipedia page acknowledging the “most unique stock screening model built”. A lot of what you need as an investor is already out there, freely shared by practitioners, experts and novices alike. So absorb what’s out there and share your nuggets of wisdom. Be generous, and be amazed how it deepens your own understanding of what it takes to be a good investor.
5. Build pockets of stillness into your life
“The best ideas come to us when we stop actively trying to coax the muse into manifesting and let the fragments of experience float around our unconscious mind in order to click into new combinations.”
Financial news channels, with multi-coloured tickers scrolling across the bottom at different speeds, psychedelic graphics of company news updates of a CFO who sneezed and the fervent urgency in the voices of the “analysts” can lead you to believe investing is like trying to hit a moving target, while hanging upside down from the saddle of a wild horse that has just been hit with a high-voltage prod. Don’t believe it. Contrary to the experts on CNBC, good investing needs time, and space.
Also, sleep, because
“…Besides being the greatest creative aphrodisiac, sleep also affects our every waking moment, dictates our social rhythm, and even mediates our negative moods…What could possibly be more important than your health and your sanity, from which all else springs?”
4. When people try to tell you who you are, don’t believe them
“You’re not in currency derivatives right now?! With Brexit, there’s no way you can lose on the Dollar-Pound put!”
“Yields can only fall in emerging markets, bonds are a sure thing. How come you’re not in them?”
You will get this all the time. People trying to tell you the kind of investor you are, or supposed to be. Block out the noise, focus on your circle of competence so you can avoid acting out of ignorance or ineptitude, two primary, and controllable reasons, for why we fail. Just like “Be your own person” is good advice, “Be your own investor”.
3. Presence is far more rewarding and intricate an art than productivity
“How we spend our days is, of course, how we spend our lives.” – Annie Dillard
Think stock market investing, and we can’t help but think of the image of a Wall Street trading desk with multiple terminals lit up with stock prices and the buzz of sharply dressed Red-Bull-fuelled MBAs yelling into phones making trades worth millions in seconds. Add to that, the new-age concept of FOMO, and it’s easy to fall into the trap of feeling an investor needs to be doing something every second the markets are open. This problem exacerbates itself in times of rising markets, precisely why I feel rapidly rising markets aren’t a good thing. Remember that the trading desks of financial institutions are abuzz because they make money (commissions) every time they trade, so they are, in a perverse self-serving way, being productive. As an investor, hyperactivity is like a chain-smoking habit, terminal.
2. Allow yourself the uncomfortable luxury of changing your mind
“We live in a culture where one of the greatest social disgraces is not having an opinion, so we often form our “opinions” based on superficial impressions or the borrowed ideas of others, without investing the time and thought that cultivating true conviction necessitates. We then go around asserting these donned opinions and clinging to them as anchors to our own reality.”
1994, A bond trading hedge fund founded. Grew from zero to over $100 Billion in assets (“B” not “M”) in three years. Run by finance veterans, PhDs, Professors and two Nobel Prize winners. 1998, over $1 Trillion in default risk across America’s largest banks. $4.4B in capital lost in one year. Shuts operations.
If some of the smartest minds ever can get it so horribly wrong, where is the shame in admitting that we’re not infallible? More important than analyzing our winners, spend time on understanding where we got it wrong – My three biggest investment mistakes. The more we’re willing to say “I don’t know”, the more chance we give ourselves to truly understand a concept. So, go ahead, admit you were wrong, learn, and improve.
And finally, 1. Expect anything worthwhile to take a long time
“…the flower doesn’t go from bud to blossom in one spritely burst and yet, as a culture, we’re disinterested in the tedium of the blossoming. But that’s where all the real magic unfolds in the making of one’s character and destiny”
This is about so much more than the concept of compounding and why it’s important to invest. It is about the first attempt at reading an annual report to distinguish a fundamentally strong company from a one that’s not. It’s about buying that first stock to then feel the pain of seeing it lose 7% in one week after your purchase. Or to watch markets tank after some macro-economic development that makes as much sense to you as a tap-dancing zebra. It’s about refining your investment approach as you understand more about what makes sound companies to invest in and more importantly, your own temperament as you discover your unique appetite for risk to develop your own investment approach, whether it’s handing it over to a fund manager or taking pleasure in building your own portfolio. Successful investing takes time, just like anything worthwhile.
What lessons have you learnt in your investing journey? As learning #6 says, “Be Generous” and share 🙂