I’ve spent the last decade investing in London listed companies. There have been highs and lows, triumphs and mistakes. It’s the same for every private investor. As with many things you often get out what you put in.
Therefore lesson number one from a decade of investing is to work hard. If you’re going to be an active investor you need to have a curious mind, persistence and the resilience to keep working hard. That’s especially true after things go wrong.
Before going onto the other nine lessons, it’s worth just saying most of these lessons are quite general. That’s intentional. The key point to take away is that my style of investing isn’t for everyone, so I’ve avoided saying how any other person should invest, for example for the long-term, or by picking value shares, or indeed focusing on dividends.
Also, nothing I say on this blog should be construed as advice. I don’t give investment advice. I seek only to encourage and hopefully inform other private investors. With that in mind, onto the other lessons.
Lesson number two is: try and enjoy it
I’ve been investing for 10 years. To stick at something for so on I think you have to find ways to enjoy it. If you don’t you can still benefit from the potential of the stock market but you might just have to invest passively, for example. I find investing challenging and for me that makes it surprisingly fun.
Lesson three is: do you own research
You need to do more than just read an article in Investors Chronicle or the FT to outperform the market. My firm view is that an investor is always responsible for their own portfolio and their own decisions. I intend to always do my own due diligence on any new long term investment that I’ll add to my portfolio. I’ll dig into a share and look at the financials, the annual report, the market opportunities, how a company compares to its competitors, the quality and backgrounds of the management team and so forth.
Lesson four: find a style that works for you temperamentally
Every investor is different. While day trading works for some, for many it’s simply not the right thing to do. Fit how you invest to the amount of time you can dedicate to it and also to how you work temperamentally as an individual. For example, if you are an emotional investor, perhaps automating a lot of the process may help you. If you panic when markets fall, perhaps it’s best to outsource your investing, or take time away from markets when things get rough.
Five: be humble
I think this is a big one. No one has a secret code for consistent success. Even the best fund managers will have their rainy days. When the going is good, remember to stay humble because your fortune could change. While I think often you make your own luck, undoubtedly there’s an element of luck, so it pays not to confuse luck and skill.
Six: read annual reports
This one is a bit specific and not applicable to some types of investor, but in the main I’d certainly suggest reading through annual reports, as well as latest announcements and so forth. For those who like the numbers you get all the financial statements in there, along with notes explaining how figures were arrived at. It also tends to set out who the biggest shareholders are, what progress the company has made over the last twelve months – and much more. I find it just to generally be a very useful source of information.
Seven: hold onto winners
This one also won’t be applicable to everyone. Given my style is more long-term, then I think it’s best for me to hold onto winners. I’ve been guilty in the past of holding quality companies and selling for a 10 or 15% gain. That’s fine if it’s a repeatable process. If not though wouldn’t it just be better if you have faith in the share to wait for it to go up much more and be collecting dividends along the way?
Eight: monitor your performance
You need to know what’s working and what isn’t and have the humility to invest more in passive trackers, or leave money to the professionals if you aren’t able to invest well yourself. My tracking has been weak to date and it’s something I’m iteratively improving this year, so I can better calculate my actual investment returns versus just how much cash I’m adding in. I want that cash to be working hard for me.
Nine: don’t compare yourself to others
Investing is a pretty individual pursuit. It can be nice to meet other investors in person and virtually on social media, but ultimately it’s best not to compare your own performance against that of others. This may come as a surprise (not!) but some people on social media are fantasists. Others have an ulterior motive like ramping or trying to sell course, while some may measure their returns using a different formula. This is why it’s best to just compete against yourself and do the best job you can.
Ten: try to identify what works and rinse and repeat
One of the key messages I think is don’t overcomplicate. If a style of investing works well for you, keep doing it. Try and identify what works for you and then repeat doing that. Try to avoid feelings of FOMO (fear of missing out) and just concentrate on trying to outperform the market is you can and do better against yourself year-on-year.
Everyone has a different approach to investing. That’s one of the joys. There’s no need to copy anyone else.
At the end of the day my approach after a decade is working reasonably well and allows me to sleep at night and not spend all day looking at the markets.
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Also you can read my recent post on creating a passive income from shares.