Understanding principles that are likely to hold through time (the importance of valuation, the power of compounding, or the benefits of diversification) is likely to be far more worthwhile than learning specific ideas about markets, assets, or trading techniques, which will often prove fleeting. These principles can become models that we can apply across all types of investment decisions.
The feedback problem makes learning to become a good investor incredibly difficult, at times it can feel like learning to play the piano but where each time we hit the correct key the wrong note sounds. It is easy to become disenchanted.
Any useful feedback we receive will often be too late, either because something has gone badly wrong or because meaningful results only emerge over time. There is no easy solution to this. Investing is an exercise in dealing with short-term noise, deep uncertainty, and profound behavioral challenges. The best we can do is base our decisions on sound principles, always be willing to learn and understand that most short-term feedback can be happily ignored.
Understand that our own experience is a very small and biased sample: We can learn from it, but it can also be deeply misleading.
Learn the right things from the right people: Learning from the experience of others is essential for investors, but it also leaves us vulnerable. From day traders posting their successes on Twitter to an outright snake oil salesman selling get rich quick trading schemes (to make themselves rich), there are more bad lessons out there for us than good ones – and, to make matters worse, the bad ones are more exciting. Unlike school, in investing the best lessons are the boring ones. We should learn from those who have the right alignment of interests, similar objectives and plenty of experience.
Got Money to Invest talk to me
A trusted financial adviser of families for years, adding value to financial portfolio.