Great investment gurus are looked up to for their numerous success stories and those who are keen in investing will surely want to know their secrets of success. As we attend seminars offered by these successful people and read through their books, we will find that there are many ways to the road of success, but at the same time, we can also see that many of them share some similarities. At the end of this article, you will identify some of the common traits shown by investment gurus such as the infamous Benjamin Graham, Warren Buffett, Philip A. Fisher, Peter Lynch, John Templeton and John Neff.
Timing is not everything
Unless you were born with an ability to predict the future, you will find that the consequence of timing the market is always disastrous. Almost all investment gurus will tell you that you will never win if you strategize your buying or selling decisions by attempting to predict future market price movements.
There are so many factors at play in the stock market, it is simply impossible for any of us to know for sure where the market is heading in the short-term or when it is going to change the direction. Many so-called experts in the market offer various types of computer-aided models which are claimed to enable investors to predict the market with high accuracy. However, no matter how sophisticated the model is, it will never be able to account for one major factor which is the human behavior. It is human nature for investors to jump and react irrationally to the market and this is what contributes to the unpredictable market scene. Each investor will be under the influence of each individual unique characteristics and circumstances and their reactions to the market will be different thus this makes the formulation of the human factor almost impossible.
The investment gurus’ advice is for investors to ignore the day-to-day rise and fall of the stock prices. It is more crucial for the investors to focus on the long-term prospects of the stocks that they invested in rather than to worry about the short-term price fluctuation. Unless the stocks they hold are facing serious fundamental issues, it is not advisable for investors to follow the roller coaster ride of the market. Most investment gurus will only sell their stocks for very good reasons. Warren Buffett once said that, after buying a stock, he would not care if the market shut down altogether for ten years as he is sufficiently confident of the intrinsic value of his holdings that he does not need the market to confirm it for him.
Pave your own path
While some investor gurus may favor value stocks, others prefer growth stocks or a mixture of both. No matter what their investment styles are, all of them hold a similar trait. They are not afraid to go against the crowd. It is part of human nature to flee when faced with danger, and when there is bad news in the air, most investors tend to let go of their stocks in fear of further drop in price. When the market is hot again, they will jump into the market once more in an attempt to join the crowd, even though the price level may already be on the high end.
This type of behavior usually result in the investors taking the ‘buy high, sell low’ approach instead of ‘buy low, sell high’ and obviously this will incur losses instead of profit to the investors. Contrary to the typical investor behavior, most investment gurus say that the best time to hunt for good bargains is when everybody is fleeing the market. This is the time for investors to discover their pot of gold.
“To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.”
Sir John Templeton
Former head of Templeton Investment Management
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As Sir John Templeton, former head of Templeton Investment Management, said, ‘if you buy the same securities as other people, you will have the same results as other people... To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.’
Know the details
You will notice that all successful investors share one very important trait: they know their investment holdings in and out. They may have different ways of getting and analyzing their information; however, they will only invest after they have done their homework well. Digging into the numbers and performing detail financial analysis are something that all of them practice before buying any stocks. Rest assured that they will not enter into the market simply because their friends are doing so.
The above are actually the fundamentals of investing, which we might have already known and sounds like common sense. However, knowing it and putting it into practice are two different things. In order to be successful, we must be able to fix a set of rules of investing for ourselves and have the discipline to follow through.
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