The 100 things I've learnt in investing – Part 2

The second in our series of lessons to invest by

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In my earlier post, I revealed the first 25 lessons I've learnt in investing. Just to recap, its important to step back and get some perspective every now and then. This list is my attempt to stop making the same mistakes I've made over and over again, and list the 100 lessons I've learnt in my investing career. Today's post contains the next 25 – watch out for parts 3 and 4 coming soon!

Number 26. Common sense is as uncommon in investing as it is in real life.

27. One of my favorite lessons from the poker table: Action is overrated. The best players (and investors) are constantly weighing the opportunities, but rarely are they moved to act.

28. A similar sentiment by Vanguard founder Jack Bogle: "Time is your friend; impulse is your enemy."

29. Selling is overrated. Reason No. 1: We often sell potential multibagger winners that would more than make up for our losers. The greater the quality of the business, the greater the danger of selling too early.

30. Selling is overrated. Reason No. 2: Outside of superannuation, selling kicks in voluntary taxes.

31. Selling is overrated. Reason No. 3: Fees.

32. In the hands of a good storyteller, almost every stock looks like a winner. Assume you're not hearing the whole story.

33. A question to ask before buying a stock: "What's my competitive advantage on this stock? Do I really know something the market doesn't?" The more specific the advantage, the better.

34. Sweat the big stuff.

35. Most of us are too enamored with "so you're saying there's a chance" opportunities. A Hail Mary belongs in the pew — not in the brokerage account.

36. A great rule of thumb for buying a house (the biggest single investment most of us will ever make), from fellow US Fool Buck Hartzell back in 2005: "If a home is selling for 150 times the monthly rent (or less), it's generally a good deal. If it's selling for more than 200 times the monthly rent of a comparable property, you're better off renting."

37. One of the toughest facts about investing is that a proper track record takes decades. Charlatans can do quite well for years and years. This is potentially dangerous for our assessment of ourselves and of others. Focusing on process, rather than results, helps.

38. Price matters. A great company can be a great big loss for you if you pay too much. Campbell Brothers Limited (ASX: CPB) is a great company, but was it really worth buying at $69 and above? (Hint: it's now trading at $54.81)

39. When applicable, use the tax system to your advantage. Investing through Australia's superannuation system can be a huge boon.

40. It is twice as easy to sound intelligent being pessimistic about the future as it is being optimistic. (In other words – watch out for the doomsayers.)

41. Greater risk theoretically yields greater reward, but a stupid investment is just a stupid investment.

42. Sir John Templeton's quote: "'This time it's different' are the four most expensive words in the investing language." The details change, but the basic storylines remain the same.

43. Investing shouldn't be improvised. Take the time to write a thoughtful script.

44. A key Buffett quote to understand: "Time is the friend of the wonderful company, the enemy of the mediocre." Why is this so? Partially because "you only find out who is swimming naked when the tide goes out." I really struggle to abide by this advice. I am often the Statue of Liberty when it comes to investing in inferior companies on the cheap: "Give me your tired, your poor, your huddled masses," etc.

45. Options promise big gains in short time periods. The problem? About three out of every four expire worthless. Contrast that with a stock, which doesn't expire.

46. Sorry, market timers: Take it from Peter Lynch, who said, "If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes." Or fellow investing great Ralph Wanger: "If you believe you or anyone else has a system that can predict the future of the stock market, the joke is on you." Or the godfather of value investing, Benjamin Graham: "It is absurd to think that the general public can ever make money out of market forecasts."

47. Keep a journal (or spreadsheet) of your stock picks, complete with your rationale for each move. Then look back on it to see if you were right. We may think we're good dressers, but all it takes is a high-school yearbook to prove otherwise.

48. Step aside, high blood pressure: Inflation is the silent killer. If your money is tied up in a bank account earning 1 or 2 or even 3%, then in real terms, your money is likely going backwards. Consider a high interest account, a term deposit or even better, shares in the banks themselves – Westpac Banking Corporation (ASX: WBC), Australian and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA) or National Australia Bank (ASX: NAB), which currently pay dividend yields close to 10% when grossed up for franking credits.

49. Diversification doesn't entail making a whole bunch of dangerous investments and hoping they cancel out. That's the financial equivalent of stabbing your leg to cure your flu.

50. 13 Steps to Financial Freedom is excellent.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, originally written by Anand Chokkavelu appeared on fool.com. It has been updated by Mike King.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »