Centuries of warfare have yielded eight essential principles that will turn you into a professional investing force.
"War is a catalogue of blunders"
Winston Churchill
They are blunders which you don't have to repeat. Marching towards the sound of gunfire concentrates the mind and investors can glean cheap lessons from the costly experience of centuries.
The Principles of War formalised by the major powers in WW2 have strong parallels with smart investing. The principles below will form a series of articles at The Fool over the coming weeks.
Objective
If you don't know your goal you'll be like an army invading just because it has bullets. Do you want capital gain or income? What is your timescale? How safe is safe for you? Read more
Concentration of Force
A half-hearted approach will lead to losses. Are you prepared to do enough research on each share or make the choice to pay a fund manager? Do you buy a worthwhile amount of each company? Is this the same for each share? Read more
Economy of Force
Your resources are precious. Decide what sectors you are and are not interested in. Even an investing mind like Warren Buffett, who has horsepower to spare, does not bother with companies that are 'too difficult'. Read more
Initiative & Flexibility
Can you react quickly to an opportunity? Do you fall in love with a share and stick with it despite changing facts? Read more
Security
Can you evaluate the risk of a share and of your whole portfolio so that a setback won't cause serious damage? Do you have the strength of mind to sell at a loss when a company disappoints, to protect your capital? Read more
Simplicity
As your powers increase, a belief may arise that complication will lead to greater profits. Generally, it will only lead to greater errors.
Maintenance of Morale
Can you stay rational when the market is stamping on your share prices? Will a single but huge setback make you think of tearing up your investment methods?
Cooperation
Meeting other investors either online or in person will, as The Fool's motto has it, Educate, Amuse and Enrich. I can highly recommend it.
I have omitted only one of the military principles, Surprise, which is used when stalking a whole company but is not useful to individual investors.
A general will plan his campaign with care. So should you. Study the methods of the greats like Peter Lynch, Jim Slater and of course Warren Buffett. Read about success and disaster.
Never forget you have an asset no general in history had -- unlimited time to prepare. There is no hurry at all to begin a campaign that will last the rest of your life.
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