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My favourite investment video

There are many investment videos out there that I really enjoy and I could watch them again and again. One of my favourites is this video called Becoming Warren Buffett which shows how he grew up and several of his best investment lessons are scattered through the video:

However, that’s not necessarily my favourite investment video. It would be What Other Industries Teach Us About Investing by Morgan Housel who works at The Collaborative Fund, he used to work for the US Motley Fool:

The video, although about investing, looks to show how other industries can relate to investing.

I can’t write everything about in a 50 minute video in a few hundred words, you should watch the video, but here are some of the main points:

Behaviour beats ‘smarts’

You often hear stories about how a seemingly poor librarian, janitor or other hard-working, low-paid person donates millions of dollars to charity in their will. Yet high-earners like investment bankers or sports people often go broke. All the librarian did was invest for the long-term in ‘normal’, quality businesses.

You could simply own shares like CSL Limited (ASX: CSL), Cochlear Limited (ASX: COH) and Macquarie Group Ltd (ASX: MQG) and do very well over the next 10 years.

People become scared of impressions in their youth

People who saw share declines in their younger years are more likely to be scared off shares for the rest of their lives, or at least allocate less of their money to shares.

Maintaining the idea that shares are dangerous would be missing out on the great gains on shares have done over the past 10 years or more.

Investing can be simple

In the video he talks about how complicated cancer treatments are preferred to simple ones for some reason. Because they’re complicated they must be better, right?

Succeeding at investing can be as simple as spending less than you earn, save the difference, buy a portfolio of quality companies and then be patient.

You don’t necessarily need complex investment models to do well.

Unintended consequences

Sometimes there are unintended consequences when we react to an event. After 9/11 there was a big rise in people driving places and a drop in passengers on flights. It’s likely that more people died driving avoiding flights (because roads are more dangerous than flights) compared to the number of people who died because of 9/11.

There are many comparatives you could make with this one. You might think selling your shares is protecting your portfolio, but you might miss out on the rebound, therefore you have actually damaged your portfolio.

Foolish takeaway

There are a few more lessons, the video is definitely worth a watch. The more we can educate ourselves about the psychological biases we have, the more likely we can avoid making those mistakes and improve our investment returns.

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One of our investors has recently returned from a research trip to Silicon Valley... and has a warning for fellow investors:

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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