When 12 millionaire stock investors start talking, I reckon it’s time for me to start listening.
In an ongoing quest to improve my investment returns, I’m a big believer in education and learning. With a focus on the investment process, I aim to feed back lessons from stock successes, failures and non-movers into improving my style.
And I’m keen to seek insights from people who’ve already achieved an impressive, life-changing return from the markets. So I keep dipping into a book called Free Capital by Guy Thomas. It was first published around 10 years ago and features insights from 12 investors who made millions in the markets.
Those investors told Thomas how they achieved their excellent investing results in a series of interviews. And he set out their thoughts in the book. However, it’s worth me remembering that conditions can change. And what worked before in the stock market, and for others, may not work for me. It’s still possible for me to lose money, and all shares carry an element of risk.
The insights in the book from the 12 millionaire stock investors reflect their differing styles. Sometimes they agree and their techniques overlap. And sometimes the insights differ. Here are my favourites:
Portfolio management
1: Stick with your best ideas
To me, this means allowing winners to run and focusing on just a few stocks.
2: Double and sell some
It’s always worth me taking some profits. And a 100% gain from one of my stocks would be an occasion worth marking by ringing the cash register.
3: Dividends as a signal
Director decisions regarding shareholder dividends can reveal much about the state of an underlying business. And that’s often true whether positive or negative.
4: Use analysts and bulletin boards to gauge sentiment
If everyone’s raving about a stock, the good sentiment is probably already in the price (and vice versa).
Decision-making
5: Look for easy problems
Some of the best investing outcomes can come from opportunities that look obvious. And this chimes with advice from billionaire investor Warren Buffett who once said there’s no premium for the degree of difficulty.
6: Selective attention
It’s easy to succumb to information overload. So I’ll focus on what really counts, such as company news announcements. After all, Buffett reckons he made most of his money in stocks by being inactive and patient. Once I’ve done my own thorough research and bought a stock, there’s no need to follow its every move. Businesses take time to roll out operational progress. So, I can read the important news releases from the company and forget most of the other noise while I’m waiting.
7: Take your own advice, not theirs
After doing my own thorough research, I need to act on my opinions without being swayed by others.