There are many self-proclaimed “stock market geniuses” out there offering you the prize of massive returns all without you having to lift a single finger.
You see their ‘limited time only’ advertising and pointless articles littered across internet websites on a daily basis, promising you the earth.
They say, you can invest in the next Amazon, Google and Apple and reap their massive returns all without you putting in the work of finding, analysing and calculating the intrinsic value of companies. I here to tell you, it is bullshit! There is no short cut to making money on the share market.
Li Lu’s Four Basic Principles of Value Investing
Li Lu is undoubtedly one of the most under-appreciated investors. The founder and Chairman of Himalaya Capital Management established his firm in 1997 based on the principles laid out by Benjamin Graham. Lu is a close friend of Charlie Munger and was once thought to be in-line to succeed Warren Buffett as the chief investment Read More
Check out these two online comments I found.
“We’re new to the stockmarket and thought a subscription to (name removed) would be a good education. Well it’s now been 12 months since we followed some of their advice and we’ve offloaded all investments we’ve bought on their advice, except one; it’s now worthless and we’re just hoping in a few years’ time (after trying to forget about it) that it might one day break even. Our own ‘gut’ purchases have been more successful.”
This is a heartbreaking, two new parents made the right decision to invest their hard earned savings for their child’s future, only to be swindled out of hundreds of dollars for a membership fee and then left worse off financially!
This guy was a bit wiser.
“Before joining (name removed) I googled some of their past recommendations during the dotcom boom and they recommended stocks that later went bust, which are particularly laughable now. They just drop losers from your model portfolios and add winners, and then measure the performance of your new composition (according to their disclosures) you can keep on looking like a great stock picker.”
If you wanted to lose weight and signed up to a gym membership today, you wouldn’t walk back into the gym the next day and ask ‘why haven’t I lost weight?’ You’d get laughed out of the gym. You have go to the gym every second day at a minimum and watch what you eat. You have to put in the work. Investing is no different. You need to take the time to learn the lingo, conduct a financial analysis of the companies financials, study the strategic interactions between the company and their competitors and then form either a buy or sell or hold & watch thesis. And that is just for the businesses you understand, you also need to learn new business models and industries by reading a lot.
When Todd Combs was studying at Columbia Business School, Warren Buffett’s visited and gave a speech. In it Buffett recommended to students that they read 500 pages a day! Todd listened and applied Buffett’s advice and now he’s one of two portfolio managers at Berkshire Hathaway!
I’m not trying to scare off investing, I encourage new investors to take the plunge but understand that it is hard and not a walk in the park. Plus, you are more likely to succeed if you have a firm understanding of what is required to succeed before you begin.
Focus on the Process, not the Prize.
Ryan Holiday, bestselling author of six New York Times books, tells the story from his book The Obstacle is the Way, of how Nick Saban, as head coach of the University of Alabama football team (one of the most successful college football teams in history) doesn’t focus on what every other coach focuses on, or at least not the way they do. He teaches his players the process.
“Don’t think about winning the SEC Championship. Don’t think about the national championship. Think about what is you needed to do in this drill, on this play, in this moment. That’s the process: Let’s think about what we can do today, the task at hand.” Nick Saban
In Ryan’s words: “In the chaos of sport, as in life, process provides us a way. It says: Okay you’re got to do something very difficult. Don’t focus on that. Instead break it down into pieces. Simply do what you need to do right now. And do it well. And then move on to the next thing. Follow the process and not the prize.”
Breaking a difficult task into pieces is one of three key elements of deep practice. Deep practice is a specific practice that increases skill up to ten times faster than conventional practice, as recommended by Daniel Coyle in his New York Times bestselling book the Talent Code: Greatness Isn’t Born It’s Grown. I always incorporate those three elements into the free tools and paid courses on offer.
In addition, cultivating patience is essential in this game as money is transferred from the hyperactive to the patient.
Thinking about the investment process, I will be releasing an investment process called The Tsunami Wave: How you can turn $10k into $20k, $50K and $100k. You can subscribe to receive it in your inbox once it is released, or bookmark and check the free tools page closer to my birthday the 20th November, it’s my birthday present to you.