I have been obsessed with investing since the age of 17, I’ve read countless books, and tried just about every style of investing. I’ve made lots of mistakes and learned a lot from others. I’m also a big fan of self-improvement – I always try and learn from my past experiences and use those skills in other aspects of my life. I have drawn many parallels and learned many life lessons from my investing experience. I thought I would share with you some of those principles. I hope they help you in however you decide to apply them.
I’m Shane, a Quantitative investor and lifestyle designer, and this is Aikido Finance.
These are not just investing rules. These are principles for a better life.
16 Life Principles Learned From Investing
1. Be contrarian
To do better than others, you have to do something different to others. In fact, it is often better to do the exact opposite!
2. Compound interest applies to all areas of life
Practice good habits frequently, forever.
3. Think Long-term
Premeditate on your goals. We often overestimate how much we can get done in the near term, but greatly underestimate how much we can get done in the long term.
4. Quantify everything
“If you can’t describe what you are doing as a process, you don’t know what you are doing” – W. Edwards Deming
5. Think in bets
Our job in life is decide which path of decisions will likely be the best.
6. Focus on your circle of control
Concentrate on process, not outcome.
7. Consistency is key
Small daily improvements are key to staggering long-term results. Consistent habits compound.
8. Occam’s razor
Simplicity trumps complexity.
9. Give yourself a margin of safety
Things won’t go as smoothly as you expect.
10. No risk, no reward.
The fishing is best where the fewest go.
11. Give a discount rate to your opinions
You might be wrong.
12. Always be aware of mean reversion
If things aren’t going your way – hold fast, they soon will. Conversely, in the good times prepare for the worst.
13. Always have an exit strategy.
Under what circumstances will you stop doing what you are doing?
14. Use loss aversion to your benefit.
Add monetary consequences if goals are not met. Check out crazy websites like BeeMinder
15. Don’t be a ticker watcher in your own life.
There’s no need to check every minute. Think long-term. Inspired by “Thinking in Bets” by Annie Duke. Set it, and forget it. Once you commit to a goal, follow through.
16. Be a sceptic.
Trust evidence, not opinion
17. Take Gains.
Quit when you’re very far ahead. Don’t wait for mean reversion to take hold. Realise when you’ve won and enjoyed the victory.
18. Momentum – Let your winners run.
If something is working, keeping doing it! As Jim Collins discusses in his book “Great by Choice”: Fire many bullets until one hits, then fire your cannonballs.
And that’s just about all the investing-life parallels I have for the moment. At Aikido, we’re quant to the core. You check out some of our long-term quantitative investment strategies here.
Until next time!