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Whether you copy Warren Buffett, your frat bro, or — God-forbid — CNBC, it seems that few are willing to take a risk on picking their own investments.
But as Mikhail Gorbachev said, “It is better to see once than to hear a hundred times.”
It is scary to pick your own investments. Surely, the oracles on Wall Street know better, and it’s worth paying those 2% management fees to eat from their table. Getting an edge in the stock market seems like it would take a lifetime of discipline and research. And well, it does.
“Most people use spreadsheets as an alternative to thinking.” — Richard Thaler
So either put in the work or stick to a stupid simple index investing strategy.
But for your own sake, shut off the Jim Cramer.
Stockbrokers Don’t Know Squat
What’s the difference between a stockbroker and a used car salesman?
The car salesman knows when he’s lying.
If you don’t understand precisely why an analyst, broker, or talking head is suggesting a stock, don’t touch it. That means the nitty gritty details and all. Do you understand the historic performance of the business’s financial statements? No? Well then you are just playing Russian Roulette.
“In God we trust. All others bring data.” — W. Edwards Deming
If you want to beat the indexes, then you need to dig. You need to learn, test, and iterate with an undying passion. Whatever the market is babbling on about will not give you a successful portfolio.
As Charlie Munger explained, “Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.”
Durable Convergence
There is one all-important principle to picking a great investment:
Find a business that has attained a convergence of financial, technological, and strategic positions that make growth a sure thing.
Take Nvidia for example:
Nvidia is clearly at ridiculous valuations right now. But, ten year ago an investor with their ear to the…
