Doing a thread here on lessons I learnt in investing. Will enrich it as new thoughts come about. Doing like
@FRValue
's massive thread.
1/ Focus on the downside protection. Avoid highly leveraged companies.
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2/ partner with great management teams. Honest, hard working, that respect minority shareholders, skin in the game and good capital allocation skills
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3/ meet management as much as you can to get a feeling of them, see how they think. Not many people go and see management in small and mid caps.
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4/ have a cool off period after meeting management so as to reduce the instant favorable impact to have exchanged with them.
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5/ have your own style of investing. Be confortable with it
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6/ once you have a convixtion and a thesis on a company: act. Exchange on this conviction with a few investors who you respect but at the end of the day it’s your call
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7/ be among the top 5% expert of the companies you have in your portfolio. This I learnt through
@GavinSBaker
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8/my biggest mistakes and my biggest loses came from over leveraged companies, poor management (not honest, hidden agenda), investment thesis which was too complex.
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9/ opportunity costs are really important. When hesitating between different ideas, this is my judge of peace.
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10/ work on having more cash flow to invest and launch the snowball.
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11/ be patient, have the courage to hold your companies through good and bad times if the thesis hasn’t changed. A company I own has recently seen an important price appreciation but before that the price went nowhere for seven years.
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12/ pay up/average up if the investment thesis is going as planned and management team is delivering.
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13/ think hard before adding a new company to your portfolio. The best idea is most probably a company you already own.
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14/ concentration versus diversification: it depends on each person. There is no single rule out there. Be confortable and make sure you can follow your companies. The aim is to sleep well
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15/ own your mistakes. Never blame someone else. I have seen people doing that and I personally refuse to interact with them.
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16/ Reinvestment opportunities for a company are really important and underrated.
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17/ Read annual reports rather then only investment books.
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18/ you don't need to be original in the companies you own. No need to have to have the most unusual companies just own the ones you understand.
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19/ to check someone's conviction as the weight of the company in his/hernet worth. That number will tell you much more about someone's conviction.
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20/ the best family run companies tend to do small acquisitions as they are easier to integrate. They buy to add a layer to their offer not to increase their sales.
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21/ master tax rules of your country. It will make a big difference and help a lot your compounding.
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22/ build your team of mentors who share the same values as you. Have a solid group of very good friends who will be there for you in good and bad times and even if they are not investment experts they know you well and will guide you well.
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23/ consistency is the tunnel to greatness. Keep it going, read annual reports. Investing is fun for me, keep it that way. It isn't and will never be work.
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24/ Long term investment horizon. Your investment time horizon will make the difference. In french we say "avoir le temps long".
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25/Explain investing to your children. You will give them a great start. Teach them delayed gratification and show them that investing is like being a police detective. Investing is an investigation!
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