Value investing is, no doubt, a considerable investment strategy to undertake. However, apart from having a good understanding of the various asset classes and investment products, one needs to embrace the key traits of continual learning, patience and discipline in order to be a successful at value investing! In this section, we expound on the said key traits of successful value investors.
Continuous Learning
There is an old adage that “readers are leaders”. It couldn’t be further from the truth in the investment world. Many successful investors are known to be voracious readers. When asked what his usual day at work is, Warren Buffett says that “I just sit in my office and read all day.” Other successful investors like Sir John Templeton and Anthony Bolton have also been seen commuting regularly with stacks of reports in their hands. However, successful investors do not just read within their own field (i.e. investing and finance). They are also known to read widely across many diverse fields in order to improve their knowledge and to gain a holistic perspective on life.
They typically adopt a mind-set of “life-long learning”, educating themselves and improving constantly. This allows them to remain open-minded and to adapt to an ever-changing world. As Hong Kong business magnate Li Ka-Shing emphasises, “more knowledge doesn’t guarantee more wealth, but it does allow me to understand more opportunities.”
Discipline
All successful investors are incredibly disciplined. But what exactly are they disciplined about? They are disciplined about their investment approach. Successful investors tend to have a well-articulated investment philosophy that guides their ‘rulebook’, and they are highly disciplined in the way they execute their strategies and go about finding suitable investments.
For example, you may find a successful value investor staying away from a company’s stock which is deemed to be overvalued despite a high level of optimism surrounding its prospects. During the days of the Dot.com boom in the late 1990s, many value investors shunned away from newly-listed companies that operate with business models built on the promising prospects of the internet. Many of them were trading at extremely high valuation multiples, and some of them didn’t even have a track record of sustainable earnings growth. While they were initially criticised for their lack of interest in this new ‘dot.com’ trend, the disciplined value investors who stayed true to their modus operandi actually saved a tremendous amount of their own and clients’ capital when the whole tech-bubble imploded!
You too, need to adopt a disciplined approach that reflects and refines your investment philosophy.
Patience
The Irish used to say that ‘castles were built a stone at a time’. While it may sound clichéd, patience is a great virtue that has been touted by not just successful investors, but by many successful people from many diverse fields. In fact, every great success story throughout history has patience at their core; any remarkable and great work takes time, decades even, in order to succeed. Mark Twain started his writing career at 27 years old but didn’t write ‘The Adventures of Huckleberry Finn’ until he was 50 years old! The well-known Briton Sir Winston Churchill dreamt of a great political career since the days of his youth but didn’t become Prime Minister of the UK until he was in his 60s!
As written above; given that successful investors are disciplined about the way they approach the markets, they tend to exhibit patience when it comes to looking for the right investment and when it comes to giving their strategy time to work. Warren Buffett isn’t exaggerating when he famously piped that “the stock market is a device for transferring money from the impatient to the patient.” Remember that when you invest!
Focus On The Long Term; Have A Long Term Strategy
While successful investors may all possess different investment philosophies, practices and strategies, they all focus on the long term – they invest to maximise the real value of their wealth for the long run. This implies that they are not in the game just for a quick buck, or to make money within a relatively short period of time, or simply just for the thrill and ‘kicks’ of it. Successful investors are serious about their investing, and they approach it professionally like how a businessman builds and manages a business.
A businessman plans for his business for long-term growth, devising strategies and ways to provide the best value to his clients and to grow his business. He also adopts a ‘game-plan’ in order to prepare for expected as well as unexpected scenarios – for there is always incomplete information in the business world. Similarly, successful investors focus on the long term and devise a ‘game-plan’ (their investment philosophy and strategy) in order to navigate the financial markets and to achieve their goal to grow and maximise the real value of their wealth over the long run.
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