One must go on working silently, trusting the result to the future.

Vincent van Gogh

Where does one start to become an investor? The pathway is not straightforward or a step-by-step process like other “careers.”

To become a doctor, you typically news to follow a specific pathway:

1. Earn a bachelor’s degree.
2. Earn a medical degree or osteopathic degree.
3. Pass licensing exams.
4. Complete a residency program.
5. Complete a fellowship program.
6. Pass all necessary exams.
7. Obtain a medical license.
8. Continuously renew license renewal and participate in continuing education.

To become an investor, you typically need the following:

1. Open a brokerage account.
2. Buy an investment.
3. Sell an investment.

There are a lot more steps in how to be a real investor. I’ll add some helpful steps and advice.

Investing is more behavioral than a skillset.

Successful investing does not require a high I.Q. or extensive education. Patience, memory, and observational skills are needed to be a good investor. Investing should be viewed by probabilities and not possibilities. In the long term, investing is like a casino where the statistical chances are in your favor. In the short term making predictions is more like roulette.

Some people think the behavioral aspect of investing is mobo jumbo, but ask yourself why the average holding period of stocks is just six months or less. How does an investor go from being a full-fledged long-term investor to selling your entire portfolio based on CPI data or spy balloons? You have probably heard the famous Warren Buffet story: Amazon founder Jeff Bezos once asked Warren Buffett: “You’re the second richest guy in the world. Your investment thesis is so simple. Why don’t more people just copy you?” To which Buffett replied, “Because nobody wants to get rich slow.”

That’s why I do not look at investing as a skillset but as a process that you need to experience firsthand to understand fully. If you are a parent, try asking someone single how to raise children. Almost anybody can provide the textbook definition of parenthood, but you will likely only understand it contextually once you become a parent yourself and experience it firsthand.

Long-term investing is a highly probable winning strategy that requires investors to witness massive downward spirals in their net worth. How one handles it is based on temperament rather than logic.

Finances are personal.

For many people, money is more uncomfortable than sex, politics, and religion. That could explain why so many Americans do not talk about finances and likely contributes to why we are so bad at managing it.

In investing, you are not in competition with Bill Gates, Elon Musk, or your rich neighbor. Your biggest enemy for finances is often the thoughts in your head. Like maintaining a healthy lifestyle, one must personalize investing to your goals and needs. Everyone has different diets and lifestyles. There is no best way to invest because everyone handles volatility and risk differently.

Investing has always had an undeniable link to luck.

Doctors, engineers, or professors do not want to hear this. Intelligence may hurt you as an investor. The truth is the janitor is on even footing with the brain surgeon working at the same hospital. Investing isn’t a high-IQ game. The technical skillset required to be a brain surgeon doesn’t translate to successful investing. The janitor can succeed if he has the correct behavior and mindset. Ask Ronald Read.

Investing is a game of probabilities, but even doing the right thing can cause you to lose money. Going all-in with a full house is statistically the right decision, but it gets beat by a royal flush every time.

Daily stock movements are unpredictable, yet analysts try to make sense of these movements, even marginal ones, with near certainty. Stock prices act like a roller coaster or whipsaw. Instead of trying to analyze the minutiae of volatility, I like many others, preach long-term investing. It puts the probabilities in your favor, and you avoid external noises.

From my observation, I see two significant problems really “smart” people are doing in the market. First, people need to focus on the goal of investing: making money. The stock market isn’t a place to make ideological statements or boast about your ego. Politics and religion are an endless black hole because there is never a clear winner or loser. There is nothing wrong with having strongly outspoken beliefs, but it has no place in your portfolio as it provides no competitive advantage in the financial markets.

Secondly, many intelligent people in the market make dumb decisions because of arrogance. There is a thin line between confidence and arrogance. Many smart people fool themselves by thinking they know things that are not knowable or predictable. Having vast information or research knowledge doesn’t translate to bigger returns. The most intelligent person in the room isn’t necessarily the one with the healthiest diet or the most successful financially. One of the best examples of a smart guy outsmarting himself and making a lousy decision is Steve Jobs, a brilliant entrepreneur who died too early, most likely because he couldn’t follow the advice of his doctors.

Simplification over Sophistication.

“The greatest enemy of a good plan is a dream of a perfect plan.”

Carl von Clausewitz

“The simplest solution is almost always the best.”

Occam’s razor was named after 14th-century logician and theologian William of Ockham.

How many people know all 613 commandments from the Old Testament? The majority of people remember only the first 10. You can even simplify the Old Testament as loving your neighbor as yourself.

Having a simple investing strategy is often the best strategy. Higher education rewards complex ideas and theories, but investing is a different animal.

Many successful investors would agree on the benefits of simplification, and most importantly, it keeps you sane. When you are confused and scared, you are more likely to make obvious mistakes. Even a small amount of anxiety can choke a vast amount of intelligence.

Outside of a rough snapshot, I don’t care about GDP, industrial production, retail sales, consumer spending, manufacturing outputs, imports, exports, etc. I tune out the noise. I am not an economist. I am an investor. The majority of economic data releases are non-factors. Even quarterly earnings reports are sensationalized as big events with significance and importance. Trying to make sense of all this is maddening and fruitless.

Understand how consumer behavior works, and find companies that generate free cash flow. Companies that can reinvest that free cash flow and expand the value of the enterprise in the future will likely be big winners.

Find order within chaos or stand still within a fire. Life is endlessly confusing and agonizing. Those that can maintain homeostasis within chaos will be the most successful.

Passive investing should not mean set it and forget it.

I recommend all investors watch 1-3 hours weekly of more traditional finance news channels like CNBC and Bloomberg. Watching too much financial news is a time-waster, but you at least must understand the general sentiment of retail and institutional investors and learn Wall Street vernacular.

Like how doctors participate in continuing education, investors should try to continue their education. Read or download an audiobook every quarter. I would avoid “How To” books about day trading or getting rich. Anything from Peter Lynch, Kenneth Fisher, and Joel Greenblatt are all winners.

You can explore less traditional sources for investments like youtube or Reddit once you are grounded with at least a base of solid financial knowledge from people that know what they are doing.

Balance is everything in life and investing.

A great investor must find a balance between obsessively looking at their portfolio daily and being too passive.

Have confidence but not arrogance.

Have a plan but be flexible and open-minded.

Investing is an art and science; you need to find the balance. Like improving your overall health, no one needs to run 5 miles daily to maintain fitness. It’s also okay to occasionally eat cookies and cakes, but not overindulge.

It would help if you had balance because it’s an assortment of uncertainties regarding investing and the economy. The dilemma in financial markets is that people are suckered into those who speak in certainties rather than probabilities. Certainties do not exist legally in the stock market.

It is okay to make mistakes.

“The risk of a wrong decision is preferable to the terror of indecision.”

 Maimonides, Jewish Rabbi

Warren Buffett once said he’s owned 400 to 500 stocks during his life and made most of his money on 10 of them. Charlie Munger followed up: “If you remove just a few of Berkshire’s top investments, its long-term track record is pretty average.”

Tails, You Win

It is okay to make mistakes in investing, a lot of mistakes. Evaluating stocks from good vs. bad companies to cheap vs. expensive is subjective, and the odds are not in your favor to be right all the time. In investing, precise answers are not realistic or possible. Besides making money to achieve that goal, you need to learn from your mistakes and minimize them.

Everyone needs to create some room for error because if you have a long enough time horizon, the odds increase of a low probability infrequent event from happening. For company x to go from price y to price z, it cannot be predicted accurately in a flow chart.

Think exponentially.

Most of the writers portrayed an expansive future. But not George H. Daniels, a man of authority at the New York Central and Hudson River Railroad, who peered into his crystal ball and boneheadedly predicted:

It is scarcely possible that the twentieth century will witness improvements in transportation that will be as great as were those of the nineteenth century.

Elsewhere in his article, Daniels envisioned affordable global tourism and the diffusion of white bread to China and Japan. Yet he simply couldn’t imagine what might replace steam as the power source for ground transportation, let alone a vehicle moving through the air. Even though he stood on the doorstep of the twentieth century, this manager of the world’s biggest railroad system could not see beyond the automobile, the locomotive, and the steamship.

Three years later, almost to the day, Wilbur and Orville Wright made the first-ever series of powered, controlled, heavier-than-air flights. By 1957 the USSR launched the first satellite into Earth orbit. And in 1969 two Americans became the first human beings to walk on the Moon.

Delusions of Space Enthusiasts

The world in the future will look drastically different from the world today. Compare 1923 with 2023. No one can accurately predict the future, but that doesn’t mean the future will follow a linear, step-by-step progression.

The problem with being really smart is that you can often think you know better than everyone else. Notice how the future is often forecasted with linear thinking, but when we look at history, it is driven by exponential, low probabilities events. How is history a description of impossible events becoming possible, yet you will hear future forecasters lay out the future in a predictive map?

A successful investor needs to have an exponential element in their portfolio. If your entire portfolio consists of index funds, you are either selling yourself short or fooling yourself with a false sense of financial security. There is no need to sacrifice your gains when you don’t have to. Index funds are the equivalent of accepting a plea deal when the risk of conviction is low.

As an investor, you must look at investing ideas as a scientist. Take other views and opinions, put them in your laboratory, and see what works.

Stop with Groupthink.

I always voted at my party’s call,
And I never thought of thinking for myself at all.

H.M.S. Pinafore: When I Was a Lad
Song by Arthur Sullivan and William

Groupthink, or investing based on a consensus, is one of the investors’ most common mistakes. Investing isn’t a consensus-building activity; it is an individual game like chess or golf. You will likely get mediocre results if you approach your portfolio as a politician approach legislating.

The greatest thing about investing in your portfolio is that it’s yours. You can do whatever you want. It reflects your personalized goals. You can invest as much or little, heavily diversified or concentrated; it is up to you.

In politics, the goal is not to be an outlier. Politicians need safety in numbers to get bills passed. When you lose the numbers, you lose job security. In almost any job, you must accommodate and compromise your wants with the employer’s needs to stay employed. The financial markets are a different beast. The more ambitious your goal is, the more you want to be an outlier. In running your portfolio, you are the boss and reap all the gains. You cannot be a long-term investor and follow groupthink/consensus because, eventually, the sentiment changes. If you can’t think for yourself, you will betray your goals and principles.

Obtaining and maintaining wealth can be summed up in two principles.

Delayed gratification and having fewer wants than needs.