Investing is one of those disciplines you may never truly master. Even the great Warren Buffett has (and does) make mistakes. All we can hope is to learn from our mistakes and get a little better each day.
As part of my own journey, I like to study what works for the world’s best investors like Buffett and what doesn’t. So here are three investing ‘secrets to success’ I’ve observed experts using which I try and implement into my investing style.
Secret 1: Be your own person
One of the downsides to the rise of the internet is how many different opinions are accessible and can influence your own. For every good idea you have, you can be sure there are ten articles that will completely shoot you down.
Not letting these get in the way of a good high-conviction idea you have is a secret to success. Remember, Afterpay Ltd (ASX: APT) was under $9 a share just two months ago and many said it was done as a company. Today, it’s over $47 a share.
2) Don’t trade your profits away
For some reason, popular culture often paints successful investors as traders – jumping in and out of shares a hundred times a day. This couldn’t be further from the truth in my view. In contrast, the most successful investors I’ve observed (like Warren Buffett and Charlie Munger) seem very happy to not do a whole lot most of the time.
Instead, they wait for once-in-a-decade opportunities to buy the companies they like at the right price. Buffett himself was said to want to own Coca-Cola shares ever since he was a child. But he waited until 1987 (when he was 57 years old) to buy his first tranche. Now that’s patience.
3) Most investors are better off buying the index
Here at the Motley Fool, we think anyone with the right attitude and decent experience can outperform the market over time and get awesome returns. But the sad truth is, most retail investors (and many professional fund managers) simply don’t. As such, these investors would have been better off just buying an index fund like the Vanguard Australian Shares Index ETF (ASX: VAS).
I’m not saying that everyone should just give up and ‘buy the index’. But it’s a sobering statistic that any investor who wants to become successful should always keep in mind.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.