Here’s How to Become a Successful Investor In Just 515 Words!

According to Jeff Miller, to be a successful investor you need to have the right attitude, know what mistakes to avoid, develop some winning traits, identify some key investment themes for the year and develop and execute a plan around them. Read on!

(This article has been edited and abridged by Lorimer Wilson, Managing Editor of munKNEE.com with the assistance of A.I. Bing for the sake of clarity and brevity to provide a fast and easy read.)

The Winning Perspective

The objective of every investor is to find successful investments. This requires three things:

1. Identifying companies where business prospects are better than most expect.
2. Finding an attractive stock price to establish a position.
3. Waiting for the market to recognize what you have already seen.

Three Mistakes to Avoid

1. False Comparisons: There is a popular methodology that is very expensive where the analyst finds some time in the past that he thinks is comparable and goes from there. This is all completely bogus, and you should ignore it.
2. Ignoring Data: There is a powerful movement encouraging people to ignore data. Many pundits find something wrong with every report. At the extreme, the government reports are characterized as political and manipulated. The private reports are often viewed as biased as well. This is a powerful leveling force for those who have limited methodological skill. In a world where anecdotes rule, everyone can tell a story.
3. Getting Political: It is a serious investor error to confuse political opinions with forecasts about the economy or the market. I call it political agnosticism – a willingness to make money no matter what party is in power.

Winning Ways

1. Find Solid Forecasting
   • Predicting the economy is not easy. Successful investing does not require perfect economic forecasting, it only requires an edge.
2. Mid-Course Adjustments
   • No matter how well a forecast is prepared, things change. When the circumstances change, you must be willing to adjust.
3. Ignoring the Political Debate
   • Many of the arguments – measuring the number of jobs created or saved is a good example – depend upon sophisticated methods, assumptions, and conclusions where there will never be agreement. Investors should focus on data, not the political spin. Focus on real measures of progress, or the lack thereof.

Summary

Individual Investor Implications

• For the investor who has “missed the rally”, there is still time. I do not see the current market surge as in the “late innings”. Well-chosen specific stocks can still do very well with gains of 20%+.
• For those with a negative world view – suppose you think that the Fed, the President, and the Congress are all blundering – you do not need to be “all in” on this viewpoint. Consider allocating some investments to stocks with great potential. A few big winners can help you if your overall political viewpoint is incorrect.
• Each investor is different. You need to consider your own investment goals, your full range of assets, your risk tolerance, and other factors. Most new investors are:
  • under-invested in stocks,
  • ill-prepared for retirement,
  • and have nothing to combat inflation.
• A general rule is to determine your “normal” stock allocation and increase it by about 10% to reflect the current opportunity.