Investing Principles
12 important lessons about the stock market that has consistently distinguished Top Investors vs Average Investors.
One lesson and One FinTwit Example.
Here is a Thread:
(Pic h/t @visualizevalue)
1. Pareto: 80% Inactive & 20% Active
Comfortable appearing boring but aggressive when the opportunity arises.
Investors must be willing to spend long periods of time on their hands. But yet be prepared to act when others are panicking.
One example: @adventuresinfi
2. An ability to always remain calm & rational, but still active
They're engaged by conducting research and constant DD on their holdings, yet always calm
Good Investors only let evidence drive buy/sell decisions. They avoid impulsive behaviours.
One example: @StockNovice
3. Obsessed about the Process > Outcome:
Conviction in your investment process combined w. a mindset that your process can always be improved upon.
They measure and analyze what is working and not working within their process and can back-test it.
One example: @investing_city
4. Balance both the qualitative and quantitative elements of Investing:
The ability to appreciate the arts of the markets (Qualitative factors), but be comfortable in calculating & measuring the science of Investing (Quantitative metrics)
One example: @borrowed_ideas
5. Understand their investing personality & prioritize risk management:
They avoid self-destructive investor behaviour.
They are self conscious of their strengths and weakness in the markets. A better self-awareness drives better decision-making.
One example: @richard_chu97
6. Growth Mindset + Resilience:
They appreciate R-Dalio's words of Pain + Reflection = Progress.
The ability to learn from past investing mistakes and move on. They know every investing failure is an opportunity to grow in the markets.
One example: @StockMarketNerd
7. Curiosity & Learning:
Outperformance can come from Investors who are voracious learners.
Good Investors knw how to focus on the "important" metrics. They can separate the lines between noise, information & insight.
They are constantly learning.
One example: @RamBhupatiraju
8. Strong Convictions but Loosely held:
Good Investors have deep convictions in their holdings/picks backed by their research.
They welcome criticism and bear points.
They are not afraid to quickly change their mind once the data and evidence change.
One example: @FromValue
9. Appreciate mean reversion happens in business & markets:
An understanding that stock prices move faster than business fundamentals.
They have an appreciation that a great business can deteriorate overtime to become a poor business.
One example: @hhhypergrowth
10. Openminded & Flexibility.
This one comes from S-Druckenmiller himself (@TrungTPhan's interview)
Good Investors should be rigid about their convictions but understand that despite their convictions, they must be willing to be flexible.
Read more:
One example: @Soumyazen
11. Appreciate the market boom & bust cycles
They understand that crises are Inevitable and know that short-term underperformance is inevitable.
But they are obsessed about playing the long-game.
They have a good sense of perspective for markets.
One example: @OphirGottlieb
12. Finally, they love this game and are passionate about it!
Good investors are energized by the market and by all its components.
Just read these words again from S-Druckenmiller(h/t @TrungTPhan)
Final example: @BrianFeroldi (most passionate person I know).
END/
I'll be reading @morganhousel's Psychology of Money next on a long trip. Let me know if you've read it and have any thoughts
I'll try to apply this concept from this thread and summarize my highlights from the book into my newsletter. investianalystnewsletter.substack.com
TL;DR - Next
So In Summary:
1. 80% boring & 20% aggressive as opportunity arises
2. Stay rational & let data drive your decisions
3. Be obsessed about the process > outputs
4. Balance both the art and science of Investing
5. Understand your investing personality (strengths and weakness)
Summary-2:
6. Develop a growth mindset amidst setbacks
7. Develop a curiosity for constant learning
8. Strong convictions, loosely held
9. Appreciate mean reversion happens
10. Be Openminded & flexible
11. Develop long-term perspective
12. Stay Passionate & enjoy this game
The Top vs Average Investors separate themselves on thin lines.
Investing can be hard, but many of its core principles are easy and are still the same.
The best part is everyone can be successful.
Hope you found this helpful!
Cheers, @InvestiAnalyst!
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