The ability to invest is a privilege, since most of us cannot afford to do nothing but learn and wait until a good investment opportunity shows up.
What Do the Best Investors Do That the Rest Don’t?
11–20 of 63 posts
Re: What Do the Best Investors Do That the Rest Don’t?
#12Insider trading sometimes
Re: What Do the Best Investors Do That the Rest Don’t?
#13My first question would be: Do "best investors" actually exist?
The title implies that some investors are better than others. But I have not yet seen any data driven argument in favor of this theory. There are so many investors on planet earth, that even if they all have the same ability to predict the future prices of stocks, some will do unbelievably better than others. By pure chance.
The article starts with a photo of Charlie Munger and Warren Buffett. Does this imply that they are "better" than the average investor?
Someone who would have invested in Microsoft 20 years ago and said "Hey, I am sure software will grow like mad! That's enough for me to know about the markets. From now on, all I will do is wait." would have been right. And would have seen about twice the return that Berkshire achieved. There must be many such investors. Are they all "better" than Munger and Buffett?
Now some might say that it is "easy" to outperform the market with a single stock. Pick a very volatile one and your chances are 50%. And that Munger and Buffett made many investments. And that the chance is low to make that many investments and in total still beat the S&P500. Ok. But how low is the chance for the number of trades Berkshire did? Maybe it is totally normal, that some investors do that many trades and beat the S&P500 by pure chance.
By the way, a QQQ certificate which contains the 100 largest tech companies also outperformed Berkshire and had about twice their performance over the last 20 years.
Re: What Do the Best Investors Do That the Rest Don’t?
#14They come to the office and ask your employees what they are working on and they relate their experiences to each employee individually.
This is for a small company of 6
Re: What Do the Best Investors Do That the Rest Don’t?
#15They're more lucky.
Re: What Do the Best Investors Do That the Rest Don’t?
#16It may be that risk control is one of the key factors in success. Either through diversification and a broad spread of investments, or having a defined loss per position and then having the discipline to sell. Position sizing is also important, not putting too much into one investment.
Re: What Do the Best Investors Do That the Rest Don’t?
#17Perhaps it falls under biases but I'm surprised he didn't mention: Know when to quit. Or more precisely: Define your exit points and stick to them. That is, we all have a tendency to double down on bad decisions (as things go sideways). Or we get greedy as things go well and hold longer than we should.
On that note, what’s the easiest way to build a personal trading bot? Something in a simple language, that I can still nacktest perhaps stock and options.
Obviously nobody should trade cryptocurrencies, but cryptocurrency exchanges tend to have unusually equitable market access for solo quants compared to US equities or whatever.
Re: What Do the Best Investors Do That the Rest Don’t?
#18It may be that risk control is one of the key factors in success. Either through diversification and a broad spread of investments, or having a defined loss per position and then having the discipline to sell. Position sizing is also important, not putting too much into one investment.
Value investors pretty much do not use risk control as known from shorter term trading. They just buy low and sell when facts change (down) or prices change (up).
Re: What Do the Best Investors Do That the Rest Don’t?
#19It may be that risk control is one of the key factors in success. Either through diversification and a broad spread of investments, or having a defined loss per position and then having the discipline to sell. Position sizing is also important, not putting too much into one investment.
You are right that position sizing is important but for the opposite reason. Knowing your winners and then full on concentrating in them is statistically a big part of what makes successful winners.
Re: What Do the Best Investors Do That the Rest Don’t?
#20- Luck
- Get the best information, possibly insider
- Manipulate the market
- Not get caught doing these things
The strategies described in the article are strikingly similar to gambling advise. Applying these in a casino will minimize your chances of ending up broke, but you will still lose money in the long run, because of the house edge. I'd say it is the same thing with investment, if you follow these rules, you will mostly end up with reasonable market-rate returns. But to be really good, you don't just need a good betting strategy, you also need the house edge.