So You Want To Be A Full-Time Investor? Follow These Ten Tips by GEO Investing
I have been a full-time investor since 1994. From time to time, I find myself struggling to shed some of the bad habits that get in the way of maximizing my investment experience. I think a lot of investors can sympathize with these problems, so I decided to make a top ten list of rules to follow for those that are thinking about becoming a full-time investor. Hopefully, this will help you learn from my experience. If after reading this you feel like you’d like to hop into Geo’s universe, consider a premium membership where we use these principles in the very investments we choose to partake in.
Follow These Ten Tips To Be A Full-Time Investor
1. A Full time investor finds an investment style he/she can connect with
In the world of finance, you are going to have advice coming at you from multiple directions. Every full-time investor (including me) has an opinion on the best strategy to implement to make money in the stock market. Some of your choices may include:
- day trading using technical analysis
- fundamental investing
- long-term vs. short-term investing
- value vs. growth strategies
- P/E ratio vs. EBITDA ratios
- 52 week highs and lows
- long vs. short
Remember, it takes time to perfect a craft, so the earlier you can find your investing passion, the faster you will find success. In the book, Outliers, author Malcolm Gladwell concludes that it takes ten thousand hours to master a skill. That works out to about three and a half years, working eight hours every day including weekends and holidays! If you took weekends and holidays off and a standard two-week vacation, it would take you just over 5 years of work. That also assumes you are going to be 100% productive and loaded with Red Bull when you are working. I have been investing for 30 years and I am still learning.
[drizzle]2. Reality Check
The good news is that Malcom also concludes that skills can be learned:One fascinating point of the study: No “naturally gifted” performers emerged. If natural talent had played a role, we would expect some of the “naturals” to float to the top of the elite level with fewer practice hours than everyone else. But the data showed otherwise. The psychologists found a direct statistical relationship between hours of practice and achievement. No shortcuts. No naturals.
Still, you need to able to handle the stress that comes with making your living by investing in stocks. You can’t be afraid to lose money. Your emotions will be tested, that is a guarantee. Sometimes you will be enticed to take unnecessary risk to make money and at other times you may make an emotional decision to avoid loss when markets are crashing. Fear is your worst enemy – it can paralyze investment moves. It’s human to succumb to emotion, but how will you respond in the aftermath of a devastating scenario? Investing in stocks may ultimately not be your calling.
Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and stock mutual funds altogether.” – Peter Lynch
3. Passion, Passion, Passion!
Staying with Malcom:
The elite don’t just work harder than everybody else. At some point the elites fall in love with practice to the point where they want to do little else.
I still get a rush when I enter the “research zone.. Early in my career, all I did was research companies and call management teams. My office was a dungeon with no windows and no distractions. Even when I worked at The Vanguard Group – right out of college in 1992 – I would use my lunch break to call companies. I still recall when ex-CEO John J. Brennan walked into a conference room with other executives while I was eating a salami sandwich and interviewing a company.
When the memo went out that we could not use phones in conference rooms, I used phones on the “work deck”. Eventually, all phones on deck were off limits. I am pretty sure they were happy to see me leave in 1994.
I can’t totally define why I love what I do – it’s simply my passion. This next point is very important. When I began investing, money was not my obsession. Money has a funny way of finding you when you do something you like that you are good at – so don’t be a full-time investor just for the money. Do it because you like it.
I hate to be harsh, but if you don’t have the passion and drive to be a full-time investor, you are probably better served finding your passion. That does not mean you should not invest or learn about investing, but choosing the right career path is a big deal. Chances are if you are reading this article, you have the required passion.
. Finding Your Strategy
When it comes to connecting with an investment style, I was really lucky.
My dad dabbled in the stock market and while in high school and college, and I would spend 30 minutes in the evening with him watching Nightly Business Report on PBS hosted by Paul Kangas, as he summarized the day’s stock market action.
My dad would spend a fair amount of time reading press releases, looking for growth companies to invest in. My inflection point came when he gave me “One Up On Wall Street” by Peter Lynch, to read. Peter Lynch’s ability to simplify the investing process resonated with me immediately; so much so, that I decided I would not read any more books on investing until I really honed my skills.
So, what do you do if you don’t happen to be as lucky as I was? I suggest making a list of books and research sources to start looking at. It’s important to identify both your strengths and your weaknesses. Since I am a fundamental full-time investor, I feel comfortable listing some sources you can check out. Hopefully one or two will resonate with you.
Books About Investing Theory
- “One Up On Wall Street”, Growth + Value Investing
- “The Intelligent Investor”, Value Investing
- “Good To Great”, What Makes Management Teams/companies Great vs. Good
Research Tools to help you investigate the fundamentals of companies and gain an investing advanatge
- Value Line either by going to valueline.com or visiting your college or local library.
- Standard & Poor’s Tear Sheets. These are tougher to come by. You will probably have to contact a broker to get these sheets or subscribe to a service that has them.
- Quarterly and Annual reports that contain CEO Letters to Shareholders (not to be confused with SEC 10K & 10Q filings) – You can find some of these reports at Nasdaq, but for smaller companies you are probably going to have the company you are interested in send you the report.
- SEC Filings. One of the best sources for identifying information arbitrage opportunities consisting of intel that management teams have not revealed in press releases.
- Conference call transcripts at Seeking Alpha. Another great source for identifying information arbitrage opportunities.
I am a true believer that too much information is not always