The Simple Way to be a Successful Investor

Amar Pandit , CFA , CFP

Let me give you a Simple answer.

You can either Avoid Stupidity or Aim for Brilliance.

Most investing mistakes are committed by Aiming for Brilliance.

Avoid Stupidity and you will be winning the Loser’s Game.

Really……What is the Loser’s Game?

Charles Ellis in his book “Winning the Loser’s Game” writes about how Doctor Simon Ramo (a scientist) identified the crucial difference between a Winner’s game and a Loser’s Game in an excellent book on game strategy, Extraordinary Tennis for the Ordinary Tennis Player.

He further writes “Over many years Doctor Ramo observed that tennis is not one game but two: one played by professionals and very few gifted amateurs, the other one played by all of us. Although players in both games use the same equipment, dress, rules and scoring and both conform to the same etiquette and customs, they play two very different games. Ramo then summed it up Professionals win points; Amateurs lose points. In expert tennis, the ultimate outcome is determined by the actions of the winner. Amateurs seldom beat their opponents. Instead, they beat themselves.

The person who makes fewer mistakes wins amateur tennis. Investing (Professional and Amateur) is a Loser’s Game just like Amateur Tennis. There is nothing called Professional Tennis in Investing. Any person (or institution) that makes as few mistakes as possible wins in Investing too.

Some of the common costly mistakes of investing are:

  1. Borrowing and Investing
  2. Selling when the markets are down
  3. Impatience – Some things take time and compounding certainly does
  4. Lack of Investing Discipline: Investing only when things are good and selling when things are bad
  5. Timing the Market (Everyone’s favourite). This includes waiting for the right time, waiting for corrections, selling (some call it profit taking) only to time again etc.
  6. Trying to outperform others
  7. Believing Bullshit and Bullshitters
  8. Not having a Real Financial Professional (She or He is the person between YOU and VERY COSTLY Mistakes)

Such mistakes have the potential to inflict serious damage and thus avoiding these Simple mistakes should be at the heart of your investment strategy.

By the way, did I ever say (Simple = Easy)?

If you have read my posts sincerely, you know the answer to this one.