6 Habits Of A Highly Successful Investor
Research-driven investing is a full-time job.
In fact, it’s a lot more than a full-time job. The notion that a mere eight hours a day can keep anyone informed, much less on the cutting edge of The Next Big Thing, is very nearly laughable. The research, the analysis, the interviews — the rabbit holes that ultimately go nowhere — it all adds up, and that’s before a single word is actually written.
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For a number of reasons, my personal circumstances have made doing all that nearly impossible, and since I can no longer allocate sufficient time to Fast-Track Millionaire to give you the insights you deserve, I’ve decided to step away. It’s been nearly a decade, all told, since I started with StreetAuthority, the publisher of this newsletter. I don’t know how many words I’ve written. But I do know I’ve been fortunate and that I’ve had a helluva good time.
I’d like to thank Bob Bogda, my editor. Bob is a behind-the-scenes guy here at StreetAuthority, and if you want to know the truth, he’s the better writer of the two of us. Without Bob, this gig would have been No Fun. He’s a good manager and must keep a lot of people with very different needs, wants and styles happy. At this he is unmatched. So: Bob, my thanks.
#-ad_banner-#Also, along the way it has been my immense good fortune to work with the inimitable Amy Calistri, for whom my beloved bird dog is named, as well as Anthony Haddad, Sara Glakas and Brad Briggs. Lou Betancourt, StreetAuthority’s founder, has a great team, and it has been my honor to be a part of it. Thank you, Lou.
And thanks to you, my readers. Thanks for letting me have this job. Thanks for caring about me and my family. Thanks for your messages. I bid you heartfelt tidings of joy, fulfillment and peace. May all your stocks bring you alpha.
One more thing: I wouldn’t step away from Fast-Track Millionaire unless I knew that this baby I made is left in good hands. And I can assure you it is. My successor has a great track record of picking stocks that go higher, by a lot. (See the announcement below for more details.)
But first, if you will, allow me to offer a few parting thoughts…
My Final Thoughts
A good company is a well-managed one, period. That’s really all you need to know. Examples of well-managed companies are legion. Berkshire Hathaway (NYSE: BRK-B) is among the best. JPMorgan Chase (NYSE: JPM) is another. IBM (NYSE: IBM) and 3M (NYSE: MMM) each belong in the Top Ten.
But what is it that makes a company great — and brings home the bacon for investors? Frankly, I don’t know. I know Warren Buffett had a one-page analysis that he got from Ben Graham, the father of the Value School and his mentor at Columbia University, but while he has referred to it in passing over the years he’s never shared what’s actually on it.
I’ve been looking for the secret formula to the special sauce for a long time now, and I’ve yet to find the equations that support a unified theory. Perhaps one exists. But perchance it is the wrong question. The better one might be “What makes a great investor?”
That one I’ll tackle.
A great investor is insatiably curious. The fact is, you don’t read enough. Nor do I. Great investors don’t merely read the business and financial press. They indulge a wide variety of interests with a heavy dose of break-through-oriented scientific inquiry. Great investors tend to be tireless intellectual explorers, willing to consider any question, play out any scenario and always keep the most vital human question — “What’s next?” — in mind.
I’d encourage you to visit iTunes University. Check out the offerings of The Great Courses. Go to the bookstore once a week. Go to the library once a week. Teach yourself to read SEC filings. Subscribe to a trade magazine; many are free. Find interesting people who Know Things and listen as long as they talk. Challenge what you think you know. Always seek to expand your knowledge and perspective. And when you think you have things figured out, remember the words of the mathematician Carl Jacobi: “Invert! Always invert!” If you think you’ve got something figured out, look at it from the opposite perspective. Prosecute your ideas. And mark well the difference between ideas and ideals.
A great investor is rational. Key here: Expectations for future results. The long-term total compound return of the S&P 500 is 9.9%. Achieving a 25% gain in a year is a win (see below). Seeking to swing for the fences is not a bad goal — we do it over at Fast-Track Millionaire often — but we base our strategy on realistic, repeatable Big Winners.
If you seek to make 100% or 250% or more with an investment, that’s fine. It might be rational. But that must be married to a realistic time frame. It is simply irrational to presume you can pick eight stocks in a year that are going to exceed the market by a factor of 10 in one year. Understand the baseline risk-return relationship inherent to the equities universe. A marathon runner must set a different pace than a sprinter. That’s just reality.
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A great investor has a plan. The general notion of “Well, I’d like to earn some money” just isn’t good enough. It’s too vague. It’s a wish, not a mission statement. What you need is a defined and detailed action plan that can be supported by empirical evidence. Identify your goal, locate your starting point and determine your end. All that’s left is the arithmetic. Work it out. Then activate your plan, note your progress, and tweak as needed. Remember, no battle plan survives contact with the enemy, but a bad plan is better than no plan at all.
With that in mind, follow my Fast-Track model. Invest the lion’s share of your portfolio in demonstrable predictable market-facing assets. Boom. You have just lassoed a functionally bankable 10% compound growth rate. That puts you ahead of most professional fund managers. Remember, amateurs built the ark — professionals constructed the Titanic.
With the remaining 20% of your assets, swing for the fences. You don’t have to capture a 10-bagger; you need to earn a 25% internal rate of return for the life of the holding. This effectively beats the market and, in my view, delivers the most amount of gain at the least amount of risk.
But though this plan is simple, it is not easy.
And that brings us to the next point: A great investor is disciplined and patient. Once an asset delivers that 25% gain, consider getting rid of it. It has done its job. It has beaten the odds and put you in good stead to meet your goal. Of all the investors I talk to, the least satisfied are the ones who invest without a plan, who buy without conviction and either refuse to hang on through tough times or refuse to let go when things are good. All of that is solved with rational expectations, good planning, discipline and patience. Think about which of those things you’re the worst at. Then ask yourself what positive action you can take to make yourself a better investor.
A great investor is both results-oriented — investing on a plan toward a goal — as well as process driven. You have to be able to enjoy the research, to savor the arithmetic, to rally in the face of intellectual challenge. To put it another way, if you’re not having the time of your life, call Merrill Lynch, hand them the reins and take a cruise. Plant a garden. Find someone in distress and make him prosperous. If you’re not enjoying the hard work of investing, and it is hard work, then go do something that you can enjoy.
Which brings me to the last point.
A great investor is grateful. If you have enough money to invest, be thankful. Act that way. Bear this mind: Most of the humans on this rock won’t ever even see a flush toilet, let alone use one. They won’t flip a switch for reliable power, they can’t turn the tap for clean water. Their children will not be born in hospitals, most likely will not be vaccinated and spend at least part of their lives malnourished, to say nothing of disenfranchised. Outside of the States, Europe and the urban centers of Asia, many parts of the world still face long odds against easily preventable disease. Most of the world’s population gets by on less than $2 a day — about four sips of a Starbucks latte. You’ve already made it to the top 1% globally.
You won the lottery just by choosing to be born in the right place at the right time. Don’t waste a lot of time jockeying for even better position.
P.S. Introducing Fast-Track Millionaire’s New Chief Strategist
Here at StreetAuthority, it’s in our interest — not to mention yours — that we employ only the best stock market strategists across a variety of investment strategies.
Whether it’s Nathan Slaughter on income stocks, Jimmy Butts on momentum investing, Genia Turanova on disruptor companies or, most recently, Tom Carr on tech stocks, we’re justifiably proud of the StreetAuthority analysts who bring you the fruits of their research labors each month. And StreetAuthority wouldn’t be in business for nearly two decades if customers like you didn’t think they were getting their money’s worth.
But filling the void at Fast-Track Millionaire was a particularly daunting challenge. After all, we’ve committed to providing a service that seeks to consistently deliver gains that are head and shoulders above the rest.
Fortunately, we didn’t have to look far. And when we received this unsolicited email from Game-Changing Stocks subscriber Paul K in Long Beach, California, last week, we knew we had the right person in place for Fast-Track Millionaire:
Many of you, like Paul, know Genia Turanova from Game-Changing Stocks, the newsletter that’s devoted to finding the next big life-changing investing opportunities –companies that are on the verge of disrupting entire lines of businesses. And the returns that Paul mentioned above are not a fluke. Just this year alone, Genia’s 16 picks in Game-Changing Stocks have gained on average 3.5 times the market’s advance.
Genia will continue as Chief Stock Market Strategist for Game-Changing Stocks. But with Fast-Track Millionaire, her stock-picking universe won’t be limited to disruptors. In Fast-Track Millionaire, Genia will have free reign to identify any company that for any reason has the potential to deliver returns of as much as 1,000%.
Genia’s already shared some of the exciting changes she’ll be making in Fast-Track Millionaire with us. These include the implementation of three distinct portfolios to house and better track her stock picks, as well as a stock-screen feature that will identify the best companies given certain key parameters. (To learn more about Fast-Track Millionaire, go here.)
We’ll let Genia tell you more about these and other new features in her first issue, due out in less than two weeks. If you aren’t already a Fast-Track Millionaire subscriber, you can jump on board for this exciting new chapter by visiting this link.
Thanks for putting your trust in us.