Do you aspire to be a full-time investor? If so, try and learn from others’ mistakes, read all you can and learn to relax a little!
I think it's fair to say that most Fools see themselves as long term investors -- eschewing the short-term vagaries of the market and focussing on the bigger picture and the wider-angled view. I'd like to include myself in this group, having been first a semi-professional, then professional investor for almost two decades. The problem is, I'm not -- not really anyway. The sad truth is that I spend far too much of my life glued to my PC looking at short-term price movements, selling too early, getting spooked by the market into taking profits now and again, continually searching for new opportunities and investing too little, if and when I find them, because the pot is spread too wide.
Suckling at the corporate teat
Of course, this is a lot more fun than working for a living, and seems to me to be a perfectly legitimate way of suckling at the corporate teat along with everyone else, whether directly or indirectly.
But it's still not quite right. The ideal is that you can be sensible with your money, save a little here and there, invest and live of the profits and income for the rest of your days. That's great, but many of us still make the kind of short term errors I've already alluded to. And I know I'm not alone in this. Many other Fools I've spoken to are guilty of the same mistakes.
It's easy to say you'll invest in a long-term way, zooming out, taking the longer view and getting on with more interesting and exciting things in your life. But can you really do it in practice? It isn't easy.
How to be a full-time investor
So what's a would-be full-time investor to do?
Well, here are a few thoughts and musings that may help:
Resolve to hold a larger monetary amount in fewer companies' shares, which are very thoroughly researched. My portfolio is always spread too thinly over too many different shares. What this means in practice is that it's very difficult to beat the overall market's direction. It happens from time to time, of course, but it would be far more likely to happen with fewer, more concentrated investments.
Try not to make the mistake of constantly looking at changes in the value of your investments. Of course it's important to keep abreast of news and developments, but not every five minutes. Concentrate on the big stuff and don't sweat the detail too much.
It's also important to try and learn from others' mistakes by reading everything you possibly can and listening to others. The irony is that many of us are arrogant and don't learn from others' mistakes until we've made a few of our own. I've recently read "Reminiscences of a stock operator" by Edwin Lefevre (a fictionalised account of the life of Jesse Livermore), which was first published over 80 years ago. Given the age of the tome, you could be forgiven for thinking it's out of date. Not a bit of it. Despite all the technological advances and changes in markets over the years, it's very clear from reading this excellent book that human nature remains fundamentally unaltered. Of course, it would; we're only sophisticated chimpanzees after all. But that's a useful fact to remember when someone is trying to tell you we're in a new investing paradigm of some sort -- "this time it's different", etc. Stuff changes, people don't. As the narrator states: "...hope and fear ... the successful trader has to fight these two deep seated instincts. He has to reverse what you might call his natural impulses".
Try to relax and take the wider view. As Warren Buffett said "Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market". That may be easy for the world's second richest person to say, but he's right.
