I think it's easy to caught up in all the complexities of the investing process.
Successful investing combines many small streams of knowledge which flow into the broad concepts of return, risk and valuation, but over thinking can paralyse us from actually making an investing decision at all!
So to keep things simple, here are four great quotes from investors who understand the importance of the basics.
On risk:
"Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity." Howard Marks
You've probably noticed how companies you have never heard of before can suddenly spring up in the news left, right and centre and have everyone talking about them.
I've learned the hard way that these companies which rise quickly in popularity often just as quickly fall from grace once the hype dies down, so I make a conscious effort to avoid them.
On valuation
"For investing to be reliably successful, an accurate estimate of intrinsic value is the indispensable starting point. Without it, any hope for consistent success as an investor is just that: hope." Howard Marks
This requires little explanation, but it is a sage reminder on one of the most challenging and important aspects of investing. Without a way to assess value you're flying blind, with no compass for when to buy and when to sell.
On psychology:
"Good investing is boring" – George Soros
The best companies are those which get on with the job and require very little ongoing concern. Life is too short to be constantly monitoring share prices. Companies like Blackmores Limited (ASX: BKL) and Gentrack Group Ltd (ASX: GTK) both seem a little boring, but have been delivering excellent returns for investors.
On playing your strengths:
"Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world." – Charlie Munger
I love this quote because I often have to remind myself not to stretch too thin trying to understand every company on the ASX. You'll find a lot more value by playing your strengths and focusing on a few areas you understand well.
Perhaps you work for Woolworths Limited (ASX: WOW) or Santos Ltd (ASX: STO) and understand the industries better than most people. Regardless, becoming highly tuned to a few companies or industries means better understanding of the risks involved and when there is value to be had.
