The 100 Things I've Learned in Investing

As you'll see in No. 47 on my list, it's very important to step back and gain perspective. In an attempt to stop making the same mistakes over and over, here's my attempt to codify the 100 lessons I've learned in my investing career so far.

1. Most of this list is dedicated to insight on beating the market, but know this: It's darn hard to beat the market. Ninety-nine percent of people are best served steadily buying and holding low-cost index funds at the core of their portfolios -- and I may be understating that 99% figure.

2. Looking for a one-stop index-fund core? For a very reasonable 0.2% in fees a year, Vanguard target date retirement funds will automatically diversify and balance the stock and bond portions of your portfolio -- just pick your retirement date. The Vanguard family of index funds is what I recommend to just about everyone who asks.

3. Being contrarian doesn't just mean doing the opposite. The "contrarian" street-crosser gets run over by a truck.

4. In any financial matter, find out what the other person's incentives are. Discount accordingly.

5. Even a gut investment call should have some numbers to back it up.

6. Mistakes made in your 20s are better than mistakes in your 50s. Mistakes involving $100 are better than mistakes involving $100,000.

7. My all-time favorite Warren Buffett quote: "We like things that you don't have to carry out to three decimal places. If you have to carry them out to three decimal places, they're not good ideas."

8. Never buy stocks on margin, no matter how "can't miss" the opportunity is. That blend of leverage and arrogance is exactly what gets Wall Street in trouble. The difference is that we're not too big to fail.

9. Don't waste time mastering things that simply don't work (see lessons 10 through 12).

10. Example No. 1: day trading. Like playing roulette, you'll have some victories, and you may be able to fool yourself into thinking you're skillful. The house just hopes you keep playing.

11. Example No. 2: technical analysis. The only chart pattern worth noting is the jagged, but likely downward-sloping line of your savings if you follow this technique.

12. Example No. 3: leveraged ETFs. Bastardized ETFs like the Direxion Daily Financial Bull 3X (NYSE: FAS  ) are another great way to lose money. Even if you guess right on direction, the mathematics of the daily reckoning mean these instruments are long-term losers.

13. Stock stories about growth potential (e.g., tech stocks) are sexier than stock stories about track record (e.g., consumer goods stocks). Only the latter are verifiable today, though.

14. Having a strong opinion (let alone acting on it) is overrated. Knowing 20 stocks cold beats being able to challenge Jim Cramer in the lightning round.

15. Albert Einstein allegedly declared compound interest "the most powerful force in the universe." High-interest credit card debt aims that force at your wallet. To get compound interest pointed in the right direction, save (and invest) early and often!

16. A casino makes us use chips in lieu of cash, partially because we forget that the chips represent real money. Stocks may act in screwy ways and invite us to play games, but as investors we can't lose sight of the fact that stocks represent real companies. As Peter Lynch puts it using a different gambling analogy, "Although it's easy to forget sometimes, a share is not a lottery ticket ... it's part-ownership of a business."

17. When talking to other investors, have your BS detector handy. When you hear their "big fish" stories, know that their brilliant track records likely have more to do with selective memory and poor scorekeeping than skill.

18. A great Buffett reason not to fudge our taxes: "We'll never risk what we have for what we don't have and don't need."

19. Those who know what they're doing make complexity seem simple. Folks who don't (or are trying to sell you something) make simplicity complex.

20. A clear sign of the latter: jargon.

21. Asset allocation is more important than stock picking. A silly example: Say you're holding a race among five horses and five human beings. Many investors spend their time trying to rank the five human beings, when they're better off just betting on the five horses.

22. If you don't understand it, don't buy it until you do.

23. Sigh -- hard work is required to beat the market. Per Peter Lynch: "The person that turns over the most rocks wins the game. And that's always been my philosophy."

24. On the plus side, the results of hard work can be breathtaking. In his book Outliers, Malcolm Gladwell gives example after example of people we term "geniuses" who are really hyper-dedicated people who work at their craft relentlessly. Among the examples he uses are Bill Gates and the Beatles. He argues that both got to where they got because of the opportunity (and inclination) to hone their skills for 10,000 hours. That's the equivalent of five full years of work -- or 1,000 weeks of practicing 10 hours a week.

Gates had access to an ultra-high-end computer terminal because his exclusive middle school started a computer club. In high school, his access went up a notch as he gained access to the computers at the University of Washington. He talks of getting 20 to 30 hours of programming time in each weekend. On weeknights, he'd slip out of his house to take advantage of the open time-sharing slots from 3 a.m. to 6 a.m. And the Beatles were just as obsessed. By the time they broke out on the Ed Sullivan show in 1964, the Beatles had played an estimated 1,200 shows, some lasting eight hours!

25. None of the time spent checking and rechecking Yahoo! Finance portfolios counts toward those 10,000 hours. And here's the real kick in the groin: 10,000 hours is a prerequisite for mastery -- not a guarantee.

26. Common sense is as uncommon in investing as it is in real life.

27. One of my favorite lessons from the poker table: Action is overrated. The best players (and investors) are constantly weighing the opportunities, but rarely are they moved to act.

28. A similar sentiment by Vanguard founder Jack Bogle: "Time is your friend; impulse is your enemy."

29. Selling is overrated. Reason No. 1: We often sell potential multibagger winners that would more than make up for our losers. The greater the quality of the business, the greater the danger of selling too early.

30. Selling is overrated. Reason No. 2: Outside of retirement accounts, selling kicks in voluntary taxes.

31. Selling is overrated. Reason No. 3: Fees.

32. In the hands of a good storyteller, almost every stock looks like a winner. Assume you're not hearing the whole story.

33. A question to ask before buying a stock: "What's my competitive advantage on this stock? Do I really know something the market doesn't?" The more specific the advantage, the better.

34. Sweat the big stuff.

35. Most of us are too enamored with "so you're saying there's a chance" opportunities. A Hail Mary belongs on the gridiron or in the pew -- not in the brokerage account.

36. A great rule of thumb for buying a house (the biggest single investment most of us will ever make), from fellow Fool Buck Hartzell back in 2005: "If a home is selling for 150 times the monthly rent (or less), it's generally a good deal. If it's selling for more than 200 times the monthly rent of a comparable property, you're better off renting."

37. One of the toughest facts about investing is that a proper track record takes decades. Charlatans can do quite well for years and years. This is potentially dangerous for our assessment of ourselves and of others. Focusing on process, rather than results, helps.

38. Price matters. A great company can be a great big loss for you if you pay too much.

39. When applicable, use the tax system to your advantage. Retirement accounts like 401(k)s and IRAs can be huge boons.

40. It is twice as easy to sound intelligent being pessimistic about the future as it is being optimistic.

41. Greater risk theoretically yields greater reward, but a stupid investment is just a stupid investment.

42. Sir John Templeton's quote: "'This time it's different' are the four most expensive words in the investing language." The details change, but the basic storylines remain the same.

43. Investing shouldn't be improv. Take the time to write a thoughtful script.

44. A key Buffett quote to understand: "Time is the friend of the wonderful company, the enemy of the mediocre." Why is this so? Partially because "you only find out who is swimming naked when the tide goes out." I really struggle to abide by this advice. I am often the Statue of Liberty when it comes to investing in inferior companies on the cheap: "Give me your tired, your poor, your huddled masses," etc.

45. Options promise big gains in short time periods. The problem? About three out of every four expire worthless. Contrast that with a stock, which doesn't expire.

46. Sorry, market timers: Take it from Peter Lynch, who said, "If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes." Or fellow investing great Ralph Wanger: "If you believe you or anyone else has a system that can predict the future of the stock market, the joke is on you." Or the godfather of value investing, Benjamin Graham: "It is absurd to think that the general public can ever make money out of market forecasts."

47. Keep a journal (or spreadsheet) of your stock picks, complete with your rationale for each move. Then look back on it to see if you were right. We may think we're good dressers, but all it takes is a high-school yearbook to prove otherwise.

48. Step aside, high blood pressure: Inflation is the silent killer.

49. Diversification doesn't entail making a whole bunch of dangerous investments and hoping they cancel out. That's the financial equivalent of stabbing your leg to cure your flu.

50. 13 Steps to Investing Foolishly is excellent.

51. Index ETFs may be the most wildly misused products in the stock market. They are excellent tools for ultra-low-cost buy-and-hold diversification, but many use them to day-trade the market (and sectors thereof).

52. Somewhere around 80% of actively managed mutual funds (as opposed to broad index funds) don't beat the market.

53. The more we learn about investing, the more we want to start doing exotic things (naked straddle options, anyone?) and buying stock in obscure companies no one has heard of. Maybe it's boredom, maybe arrogance, or maybe the desire to impress people at parties. Or perhaps it's seeking the glory of being right when few saw it coming. I'm guilty as charged on all counts. When I'm at risk of going off the deep end, I try to remember that stock picking isn't diving. As Buffett has noted, there are no extra points (or returns) for degree of difficulty.

54. This Einstein maxim is spot-on for stock analysis: "Everything should be made as simple as possible, but no simpler." Both clauses are crucial.

55. Just because a company or industry is set to change the world doesn't mean it's a great investment. Beyond looking at valuation, there tends to be a Wild West of players until a few winners emerge. In fact, market beater Ralph Wanger says, "Since the Industrial Revolution began, going downstream -- investing in businesses that will benefit from new technology rather than investing in the technology companies themselves -- has often been the smarter strategy."

56. Jumping from one flavor of the day to the next isn't continuous learning.

57. Long-tail events (a.k.a. black swans) are highly underrated. Nassim Nicholas Taleb explains it best in his book, Fooled by Randomness.

58. Every time I start getting cocky (which is often), I am unceremoniously reminded there are no sure-thing stock picks. As master investor T. Rowe Price noted: "No one can see ahead three years, let alone five or ten. Competition, new inventions -- all kinds of things -- can change the situation in twelve months."

59. I personally get way too excited when a stock hits its 52-week lows or falls 50%. Many sins are washed away in my mind when I see a bargain, but price movement by itself is not a sufficient reason to buy (or sell). Falling knives can be death -- especially when they're rusty and gross.

60. A related point: No one consistently times the bottom or top of a stock's price (let alone the market of stocks!).

61. Don't let the false modesty of investing greats fool you into false confidence.

62. My three strikes against gold. Strike one: Its value can't be estimated with basic math (since it just sits around producing nothing). Strike two: Wharton professor Jeremy Siegel showed that going back to the 1800s, the return on gold has barely kept up with inflation and is left in the dust by stocks and bonds. Strike three: Gold as a doomsday investment doesn't make much sense. If the apocalypse (financial or otherwise) actually comes, you're probably screwed regardless.

63. Discount cash on a company's balance sheet. Managements are brilliant at squandering it.

64. Done properly, value investing -- e.g., focusing on low-P/E, low-P/B, low-TEV/EBITDA stocks for ideas -- has proven to work quite well. But as successful growth-investor Bill O'Neil warns, "What seems too high and risky to the majority generally goes higher, and what seems low and cheap generally goes lower."

65. You may be too smart to be rich.

66. Know thyself. Know your weaknesses and strengths. Here's a specific example from Joel Greenblatt: "For most people, stocks should represent a portion of their investment portfolio because I still believe that over the long term they will provide superior returns relative to most alternative investments. However, whether that portion of an investment portfolio devoted to stock investments should be 40% of an investor's portfolio or 80% is a very individual decision. How much are you willing (or able) to lose before you panic out? There's no sense investing such a large portion of your assets in a long-term strategy if you can't take the pain when your chosen strategy doesn't work out for a period of years."

67. For some help on getting to know yourself, study the common mistakes behavior finance experts have uncovered.

68. Folks say that "success has many fathers, while failure is an orphan." Combine that with our willingness to overvalue streaks owing to one event, and I start to wonder: Do we overvalue managers that leave a successful organization to turn around a woeful organization?

69. If you just heard of the company yesterday, don't buy its stock today.

70. The Internet and better regulations have largely eliminated data advantages. The problem now is isolating which data is actually meaningful. Better results stem from increasing the signal-to-noise ratio.

71. Even if you rely on advice from others, heed the words of bond fund legend Bill Gross: "Finding the best person or the best organization to invest your money is one of the most important financial decisions you'll ever make." As with stocks, familiarity alone isn't protection. Check out our seven-part special report on financial advisors.

72. Stuff that leads to suckerdom: greed, laziness, unearned trust, ignorance, and shortcuts. When in doubt financially, do the opposite of your favorite athlete.

73. Make sure to get the right odds. There should be a vast difference between what we pay for a has-been or never-was and what we pay for a potential superstar company. As George Soros puts it, "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."

74. Initial valuation matters, but generally, over longer periods of time (decades, not years), stocks have returned more than bonds. The more decades you have left, the more of your portfolio should be in stocks to stave off inflation.

75. In theory, well-timed share buybacks are better than dividends. They save on taxes and allow the people who know the company best to buy up shares when the market acts crazy. In practice, I'll take dividends. (A tangential bonus fact: Dividend stocks have historically beaten non-dividend stocks).

76. Some of the most misinterpreted words in investing: Peter Lynch's "Buy what you know." It's more like "Research what you know and then consider buying."

77. Don't be an Enron baby. Overweighting your investments in the company you work for is a double-down bet we don't need to be taking. On the other hand, your company's 401(k) match is free money.

78. There are many paths to the top of the investing mountain, but some are more fraught with peril -- and there are very few trailblazers.

79. Numbers frequently lie -- especially in isolation. Say you spot a P/E ratio of eight. Sounds darn cheap! But is that industry's profitability rapidly deteriorating? Was there a one-time item that temporarily juiced the bottom line? Is an upstart competitor hungrily eyeing its lunch? Are new regulations threatening its livelihood? Is it a cyclical industry? Is it in a country that has a really poor reputation for accounting fraud or government interference? You get the idea.

80. Mergers and acquisitions are overrated. Somewhere between 50% and 85% of mergers fail to boost value. The frequency of achieving promised "synergies" should be filed somewhere between unicorns and no-hitters.

81. It's hard to be an independent thinker when the pressures to conform are daily and good investment theses can look ugly for years before paying off. Ben Graham said it this way: "Even the intelligent investor is likely to need considerable willpower to keep from following the crowd." Famed investor John Templeton talked of his defense against crowd-following: "When asked about living and working in the Bahamas during his management of the Templeton Group, Templeton replied, 'I've found my results for investment clients were far better here than when I had my office in 30 Rockefeller Plaza. When you're in Manhattan, it's much more difficult to go opposite the crowd.'" The digital equivalent today is turning off real-time news and Internet feeds and reading more thoughtful analysis.

82. The best book I've ever read on the basics of stock picking: Joel Greenblatt's The Little Book That Still Beats the Market. It's literally written so that a small child can understand it. It also does a great job of explaining why return on capital is a measure to pay attention to.

83. It's not the rewards you don't understand that'll burn you, but the risks you don't understand.

84. The guy who invented the P/E ratio (James Slater) on small caps: "Most leading brokers cannot spare the time and money to research smaller stocks. You are therefore more likely to find a bargain in this relatively under-exploited area of the stock market." Of course, because there is less interest and less Wall Street coverage, doing your own due diligence is that much more important. The same holds for other underfollowed areas of the market, like special situations.

85. If you can learn quickly from your own mistakes, you're ahead of the game. If you can learn quickly from others' mistakes, you've won the game.

86. Jim Sinegal of Costco on why you can't pay too much attention to Wall Street: "You have to recognize -- and I don't mean this in an acrimonious sense -- that the people in that business are trying to make money between now and next Thursday. We're trying to build a company that's going to be here 50 and 60 years from now."

87. If it seems too good to be true...

88. Buffett's concept of the "circle of competence" is important: "There are all kinds of businesses that I don't understand, but that doesn't cause me to stay up at night. It just means I go on to the next one, and that's what the individual investor should do." Also consider Steve Jobs' quote: "Focus is about saying no." For a great book on saying no, read Seth Godin's tiny book The Dip.

89. The stock moves I've made based solely on the advice of others -- e.g., "He's a good energy analyst and he loves this oil stock," or "This famous stock picker is buying X!" -- have generally been disasters.

90. If you can read a dissenting opinion without resorting to an ad hominem attack, you're at an advantage.

91. Downer alert: We like control, but we can't control everything. Life and luck can (and will) trump investment plans. You can do everything right and still die penniless. All we can do is give ourselves a better chance to succeed.

92. That said, if you're reading this article, there's a good chance the genetic lottery has smiled favorably upon you.

93. Here's something to think about the next time you get antsy to buy immediately into the latest must-act-now opportunity (e.g., a hot IPO). The year 1986 marked Coca-Cola's 100-year anniversary. If you had bought shares to commemorate the occasion, you'd be sitting on something like 15 to 20 times your initial investment. Time waits for no man -- but stocks will.

94. How can we get rich? Per Ohio State economics professor Jay Zagorsky: "Staying married, not getting divorced, [and] thinking about savings." To those, I would add having the proper insurance coverage.

95. There are more than 5,000 stocks on major U.S. exchanges. A great stock picker finds one great stock idea a year. Don't let the ones that got away frazzle you into buying the ones you should have ignored.

96. The Pink Sheets and over-the-counter markets are where sketchy penny stocks live. Do yourself a favor and stick to stocks on major U.S. exchanges -- preferably ones with market caps of more than $200 million. And never, ever heed penny stock spam emails.

97. When I learned to drive, I nervously focused on each upcoming parked car. My father told me to focus down the road and the parked cars would take care of themselves. Perhaps my first lesson in investing.

98. Do not buy low and sell high; rather, buy low and don't sell often.

99. For the penultimate lesson, let's turn once more to Warren Buffett, who briefly said in his 2004 shareholder letter what took me 98 bullet points to say:

Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.

There have been three primary causes: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long under way) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.

100.  Despite my best efforts, I will repeatedly and thoroughly fail to heed these lessons. Let's hope you're better at No. 85 than I am.

Anand Chokkavelu owns shares of Berkshire Hathaway. If you're wondering, his greatest investment decision was an engagement ring. You can follow Anand on Twitter. The Motley Fool owns shares of Coca-Cola and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway and Coca-Cola. The Fool has a disclosure policy.


Read/Post Comments (70) | Recommend This Article (339)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 29, 2012, at 4:13 PM, TMFMorgan wrote:

    Great stuff, Anand.

  • Report this Comment On June 29, 2012, at 4:37 PM, TMFBWItime wrote:

    Awesome.

  • Report this Comment On June 29, 2012, at 4:58 PM, Quaker08 wrote:

    Fantastic article. Keep up the good work!

  • Report this Comment On June 29, 2012, at 5:26 PM, TMFAleph1 wrote:

    Tremendous compendium!

  • Report this Comment On June 29, 2012, at 5:37 PM, MazonCreekRich wrote:

    Thank you for an outstanding contribution -- it <<almost>> makes up for the disastrous pun on your profile:

    "Stock: Chicken"

    Rich

  • Report this Comment On June 29, 2012, at 5:40 PM, Borbality wrote:

    Thanks. lots of good stuff. Much of investing is a battle against yourself. It takes discipline and you need to be humble especially when you're just a novice like me.

    I have to remind myself that my only edge is my age (28) and my ability to set aside some of my earnings for investment.

  • Report this Comment On June 29, 2012, at 5:44 PM, TMFBomb wrote:

    Thanks for reading, all!

    And, MazonCreekRich...I'm definitely guilty on the bad pun.

    Fool on,

    Anand

  • Report this Comment On June 29, 2012, at 5:53 PM, SkepticalBen wrote:

    I read all 100. Thanks for compiling and sharing.

  • Report this Comment On June 29, 2012, at 6:06 PM, darrellquock wrote:

    Anand,

    So where do i sign up for your newsletter? hehe

  • Report this Comment On June 29, 2012, at 6:13 PM, TMFCheesehead wrote:

    I like the third part of #62 the best, but the other 99 were pretty good, too :)

    Brian

  • Report this Comment On June 29, 2012, at 6:37 PM, MosheKaye wrote:

    Excellent list Anand!

    My personal 101:

    Set a goal for every investment and don't be afraid to unwind it if that investment no longer meets that goal. IOW some profit or a minor loss beats a large loss any day that ends in y.

    ~Moshe

  • Report this Comment On June 29, 2012, at 6:58 PM, moneymaster7 wrote:

    Great article. Definitely worth reading over again and again.

  • Report this Comment On June 29, 2012, at 7:40 PM, cooncreekcrawler wrote:

    Nice, nice work.

  • Report this Comment On June 29, 2012, at 7:49 PM, PISCESMAN wrote:

    Kudos from someone who has probably made all of the mistakes you have enumerated.

  • Report this Comment On June 29, 2012, at 8:15 PM, apexchad wrote:

    Perhaps the best insight on investing I have ever read. Bravo!!

  • Report this Comment On June 29, 2012, at 8:34 PM, investwjohn wrote:

    This should be read by everyone who is investing in their future and the future of their families at least once every months. Excellent article, thank you!

  • Report this Comment On June 29, 2012, at 8:49 PM, WHOVPLLC wrote:

    "38. Price matters. A great company can be a great big loss for you if you pay too much."

    Actually, as most successful Ventuere Capital investors always know there are three things that matter: 1. The Business Concept, market and competitive advantage. 2. Management, Management, & Management, and 3. Price.

    While price is important, buying a bad business or bad management at a GREAT price is NOT enough to be successful. Price and valuation is important. Like to see and buy at valuations of < 2.0 - 2.5 X EBITDA. Less is better; just unusual.

  • Report this Comment On June 29, 2012, at 8:57 PM, Guyver wrote:

    As a new investor this makes me scared to do anything other than invest in an index fund.

  • Report this Comment On June 29, 2012, at 9:01 PM, phileo72 wrote:

    fabulous stuff and very instructive!

  • Report this Comment On June 29, 2012, at 10:34 PM, xetn wrote:

    The biggest problem is thinking you know everything about investing.

  • Report this Comment On June 30, 2012, at 12:11 AM, BigBlue83 wrote:

    Great stuff, I will definitely be reading this year after year.

  • Report this Comment On June 30, 2012, at 12:28 AM, pmzang wrote:

    have to remember to read this at least 3 times a year, forever!

  • Report this Comment On June 30, 2012, at 4:56 AM, pagenelson wrote:

    #24 contains a significant error. Gladwell in Outliers does NOT conflate the achievements of The Beatles and Bill Gates under the Rule of 10,000. Gladwell recognizes that the Beatles and other artists and highly skilled people seem to have reached high levels through hard work (endless club dates) as Anand says. But Gates is described along with Bill Joy as having been uniquely fortunate in WHEN they were born. Had Gates or Joy been born five years either side of when they were, they would not have become who they are. Gladwell demonstrates that TIMING as well as TIME spent determine success. Gladwell's books should be read multiple times.

  • Report this Comment On June 30, 2012, at 5:00 AM, midnightmoney wrote:

    72. Stuff that leads to suckerdom: greed, laziness, unearned trust, ignorance, and shortcuts. When in doubt financially, do the opposite of your favorite athlete.

    swipe du jour:)

  • Report this Comment On June 30, 2012, at 8:54 AM, LouisianaFool wrote:

    Great stuff Anand,

    I am sending the link to some of my investing brethren.

  • Report this Comment On June 30, 2012, at 9:59 AM, gabypanama wrote:

    Excellent. I think you saved me thousands of dollars. Thanks.

  • Report this Comment On June 30, 2012, at 10:46 AM, bossman5000 wrote:

    Anand is the best writer on TMF, hands down.

  • Report this Comment On June 30, 2012, at 11:34 AM, reddingrunner wrote:

    Ditto the above.

  • Report this Comment On June 30, 2012, at 12:45 PM, Estrogen wrote:

    Anand,

    Excellent stuff. Much of which I"ve had the opportunity to read myself: Gladwell, Little Book, Lynch, and of course Buffets quotes. Money Ball is another excellent one.

    I'd love to know what your average annual return on your personal portfolio has been and over what period of time. Not in dollars of course, just in %.

    You seem like you would be able to have beaten the market with your approach?

  • Report this Comment On June 30, 2012, at 1:15 PM, thetortoise487 wrote:

    Thanks for great insight. As a 25 year old beginning investor, this seems to be a great read. Although I know mistakes will be made...#6 is very true.

  • Report this Comment On June 30, 2012, at 1:31 PM, ynotc wrote:

    Great advice. Do you pronounce your last name "Chock Ful Of Value"?

  • Report this Comment On June 30, 2012, at 3:52 PM, idanpl wrote:

    very nice article. Like!

  • Report this Comment On June 30, 2012, at 5:12 PM, AceOfSaves wrote:

    I enjoyed this article very much. Both entertaining and educational. Good job and thank you, Anand!

  • Report this Comment On June 30, 2012, at 6:14 PM, Chontichajim wrote:

    Good advice especially when I reached the reason to keep a journal. A historical record of transactions lacks the reason for each move. A few extra minutes may avoid repeating mistakes while maintaining consistency.

  • Report this Comment On June 30, 2012, at 6:39 PM, neamakri wrote:

    Thanks for the thoughtful article.

    My response is directed at Guyver, the "new investor."

    I am doing great purchasing dividend stocks. My personal three favorites are (T),(ARLP),and (NYB). You can also go for rock solid biggies like (WMT),(KO),(MCD),(CAT),(GE), etc. Just read Fool articles.

    Fees can sap your money. Try to purchase at least $1,000 at a time on each stock. That way your broker fee doesn't kill you. Amass enough cash in your account, then when the market dips, buy something at a bargain price.

    FUNDS suffer from two weaknesses. (1) is that the fund manager must follow certain rules on what to buy; you are not so limited. (2) funds are composed of a numebr of components, some winners and some losers; I prefer to just pick winners!

    Thanks for listening and Fool on...

  • Report this Comment On June 30, 2012, at 6:39 PM, neamakri wrote:

    Thanks for the thoughtful article.

    My response is directed at Guyver, the "new investor."

    I am doing great purchasing dividend stocks. My personal three favorites are (T),(ARLP),and (NYB). You can also go for rock solid biggies like (WMT),(KO),(MCD),(CAT),(GE), etc. Just read Fool articles.

    Fees can sap your money. Try to purchase at least $1,000 at a time on each stock. That way your broker fee doesn't kill you. Amass enough cash in your account, then when the market dips, buy something at a bargain price.

    FUNDS suffer from two weaknesses. (1) is that the fund manager must follow certain rules on what to buy; you are not so limited. (2) funds are composed of a numebr of components, some winners and some losers; I prefer to just pick winners!

    Thanks for listening and Fool on...

  • Report this Comment On June 30, 2012, at 9:54 PM, TMFBlacknGold wrote:

    Great article! Although I think it was Newton who said the quote in 15, not Einstein. It's immaterial to the message of your lessons however.

  • Report this Comment On June 30, 2012, at 11:07 PM, SMART84 wrote:

    I do not think the writer is in no position to advise with his track record in rising star portfolio

    Anand's Portfolio (as of 6/28/12 close)

    Total Portfolio Return: -1.41%

    S&P 500 Return: 14.56%

    Difference: -15.97%

    see he lost with a big margin to S&P..

  • Report this Comment On July 01, 2012, at 4:32 AM, shredder11 wrote:

    keep it up!

  • Report this Comment On July 01, 2012, at 8:52 AM, TMFBomb wrote:

    Thanks for reading and for the questions and comments!

    We're without power here so I'll respond a bit more when I'm not on a quickly dying cell phone.

    Fool on,

    Anand

  • Report this Comment On July 01, 2012, at 11:49 AM, seattle1115 wrote:

    I had heard the famous Buffett quote from #99 ("be fearful when others are greedy and greedy only when others are fearful") many times, but I had never before heard it in context. It adds a whole level of meaning that I previously missed.

  • Report this Comment On July 01, 2012, at 3:57 PM, TMFBomb wrote:

    @pagenelson,

    Gladwell makes a few points in the book, but I'm focusing on the 10,000 hours aspect. And as I say above, 10,000 hours is a prerequisite for mastery -- not a guarantee.

    From Outliers: "By the time Gates dropped out of Harvard after his sophomore year to try his hand at his own software company, he'd been programming practically nonstop for seven consecutive years. He was way past ten thousand hours."

    Fool on, Anand

    Ps...I've gotten sucked in to retreading my favorite parts of outliers today. As you say, it's worth multiple reads!

  • Report this Comment On July 01, 2012, at 4:53 PM, TMFBomb wrote:

    @Estrogen, SMART84, and darrellquock,

    The jury is still out on whether I'm in the small percentage of the population that can beat the market. I don't have perfect records from when I started investing in the 90's but I would guess that the mistakes I was making were more egregious than average. I think I'm getting better but it's highly possible I never achieve a long-term market-beating track record over decades.

    In the meantime, I do take my own advice and anchor my portfolio with index etfs from vanguard that i buy and generally hold. Hopefully I'll increase the percentage of that anchoring but I digress.

    In the interest of keeping an investing journal I have a real-money set of stock picks (the motley fool's money) here:

    http://www.fool.com/specials/realmoneyports/real-money-portf...

    It is banking-centric because that is my specialty. For folks interested in following along, It's not meant to be a diversified portfolio. If the banking sector interests you, it can be useful for idea generation. I started it in November 2010. So far the returns are losing to the market. We'll see over the years if I can reverse that.

    In any case, I hope the lessons I've detailed above are helpful in thinking through your own investing strategies.

    Fool on,

    Anand

  • Report this Comment On July 01, 2012, at 5:01 PM, TMFBomb wrote:

    @BlacknGold,

    I believe there's some conflict about who actually said The line. Einstein is often cited so I wrote "allegedly"...like you mention it's a great quote regardless...and even better if it was actually a science great like Newton or Einstein.

    @seattle1115,

    Yeah, the longer quote puts a lot more perspective on the greedy/fearful line. Such an amazing quote.

    Fool on,

    Anand

  • Report this Comment On July 01, 2012, at 5:28 PM, jdrobinson812 wrote:

    Many good points here but I think the comments about technical analysis being a waste is just plain wrong. I know people who daytrade for a living using technical analysis. They make their living off trading. How can it be totally useless if people can make a living off it? My experience is that technical analysis often fails because:

    1) The technical analysis is bad

    2) The trader is not disciplined and mature enough to manage their positions properly

    Also, the point in the linked article on "Technical Analysis is Stupid" that all big winners in the markets have been fundamental investors sounds a lot like an infomercial where you have to put a little disclaimer at the bottom "Results not typical". So a few people have won. Who cares? I doubt those people are representative. The fundamental analysts who win are likely either lucky or skilled at fundamental analysis. The same is true of technical traders who win -- some are lucky, some are skilled.

    If the market happens to be down 80% from where it is now in the next 10 yrs, let's see how many fundamental investors are tooting their own horn. If the market is down 80%, rest assured Buffett will be down 80% too. His philosophy is entirely tied to the index performance.

    Now THAT'S stupid.

  • Report this Comment On July 01, 2012, at 5:57 PM, jdrobinson812 wrote:

    In addition to my comment above, I'd like anyone to come up with a Japanese equity investor in the pantheon of great investors. Hm, since the Nikkei has done nothing in net for decades there aren't any. I suppose everyone who invested in Japan was "technical" since all the investors in Japan have lost or made nothing at all. Only fundamental investors win in this game!

  • Report this Comment On July 01, 2012, at 6:16 PM, somethingnew wrote:

    Thanks for this well thought out article. It was very insightful. 3, 21, 64 and 79 are golden.

  • Report this Comment On July 01, 2012, at 7:43 PM, hbofbyu wrote:

    I don't think I have seen a day trader do it longer than 5 years making a living at it. Maybe a hobby but not a living. Does anyone know someone who has made a career of it? I would like to know.

    (It seems the only way they make money is by selling day-trading software or selling advice or a newsletter)

  • Report this Comment On July 02, 2012, at 11:02 AM, WishToRetire2 wrote:

    Thanks for this article!

    P.S. re: Buffet. I agree.. what's so great about this guy.... if you compare BRK to the index over various time periods lately I don't see anything to write home about.

  • Report this Comment On July 02, 2012, at 11:05 AM, alvin wrote:

    @ jdrobinson812,

    if the market crashes by 80%, warren buffett will load up and make a killing in the following 10 years. it's happened many times in the past already.

    The thing with technical analysis is you ignore fundamentals. The reasoning is price is a leading indicator for fundamentals. However, there are many instances where there is a disconnect between price and fundamentals.

    So you could end up with buying something that has a price that's trending up, while the fundamentals are actually trending down. Also with technical analysis you end up avoiding stocks that have low liquidity. However, there are many potential multibaggers in that section of the market.

    So the downside to technical analysis is twofold: 1. disconnect between prices and fundamentals. 2. avoiding low liquidity stocks.

  • Report this Comment On July 03, 2012, at 11:51 PM, marei wrote:

    May I suggest a new term to go along with "McMansion?? How about "McManager??"--Tom Reilly

  • Report this Comment On July 04, 2012, at 11:02 PM, ditcap wrote:

    Fabulous article Anand. Thank you.

  • Report this Comment On July 05, 2012, at 1:39 PM, whyaduck1128 wrote:

    I've learned #89 the hard way several times over, including some from MF.

  • Report this Comment On July 05, 2012, at 2:28 PM, JohnCLeven wrote:

    @WishToRetire2

    The reason Buffett dosen't seem impressive of late is bc Berkshire's price has not been outperforming the indexes for the last few years. However, BRK's intrinsic value, has outperformed the indexes. So Buffett has been beating the indexes, whether or not his companies share price shows it. The dummies have oversold Berkshire to the point where Buffett is buying back Berkshire shares. If that's not a buy signal, I don't know what is.

    What's the name of that guy who became super rich by realizing value does not correlate with short term price action? Oh yea...

  • Report this Comment On July 06, 2012, at 12:00 PM, Rushford wrote:

    #2 is a very bad idea

  • Report this Comment On July 06, 2012, at 12:21 PM, TMFBomb wrote:

    @Rushford,

    I have to ask. Why is #2 a "very bad idea?"

    Fool on,

    Anand

  • Report this Comment On July 06, 2012, at 3:26 PM, kaeyc2000 wrote:

    Best investment article I have read in some time. My only disappointment is that I was not able to read it sooner!

  • Report this Comment On July 06, 2012, at 3:49 PM, PoorerThanU wrote:

    Fail...see #54 if you do not know why.

  • Report this Comment On July 06, 2012, at 4:22 PM, Ab351ba wrote:

    Great job!

    My Favorite: You might be too smart to be rich.

  • Report this Comment On July 06, 2012, at 11:46 PM, Zombie111 wrote:

    Re number 36, buying when the house was selling for 150 times or less, did this include the amount paid in interest or just the purchase price? Since we first bought a house, mortgage rates have gone from over 15% to around 6%, and this makes a huge difference to the total amount the house really costs.

  • Report this Comment On July 07, 2012, at 12:12 AM, jlclayton wrote:

    Absolutely great article!

    For those interested in technical analysis, here's my two cent's worth. I daytraded stocks for about a year basically as a hobby and made a very modest amount of money. Although I did not have the strict discipline to do it full time, I have found the technical analysis that I learned to be useful in my investing.

    Whenever I am interested in a stock, as part of my research I study the charts and determine the best entry points to set my buy orders. Out of the many stocks that the Motley Fool has recommended and that I've decided to purchase, I've been able to buy about 75% of them at a lower price. By determining support and resistance levels and analyzing the volume and strength of the stock's price moves, I've been able to make my investment dollars go a little farther with more efficient buy orders and being a more patient investor.

  • Report this Comment On July 07, 2012, at 11:30 AM, TMFBomb wrote:

    @ir0b0t,

    A very good point. That rule of thumb is agnostic of financing.

    When interest rates are higher, it's advantageous to lenders...when they're lower, it's advantageous to borrowers. The higher interest rates are, the more I'd consider putting more cash down (in your example, if interest rates were 15%, it would be hard to invest at a higher rate elsewhere).

    Right now, interest rates are historically low, so if you can find a house that's also undervalued, it could be a very good time to buy. A mistake a lot of people make is simply looking at the monthly payment for affordability...the 150/200 rule helps you make sure the low interest rates aren't compensating for an overvalued house.

    But the 150/200 rule is just a rule of thumb, among many factors to consider, both monetary and non-monetary.

    This tool from Bankrate helps a bit in considering some of the issues with rent vs. buy:

    http://www.bankrate.com/calculators/mortgages/rent-or-buy-ho...

    Trulia has some interesting data on renting vs. buying in major U.S. cities.

    http://trends.truliablog.com/vis/rentvsbuy-spr2012/

    Fool on,

    Anand

  • Report this Comment On July 08, 2012, at 10:55 PM, mj2boogie wrote:

    Great article. At first I thoght - REALLY! 100 Things! Well, I'll have to say it was a very enlightening thing to read! Thanks SO much for taking the time to spell out your ideas. I couldn't believe how many of them I had personal experience with and, fortunately, how many sounded familiar (like, I've thought of that before) and made sense to me.

    I would rec this several times if allowed...

    Mark

  • Report this Comment On July 09, 2012, at 6:20 AM, jharmon64 wrote:

    This article has almost no value to it. I was hoping to see some good advice.

  • Report this Comment On July 09, 2012, at 2:07 PM, frankwomble wrote:

    @jharmon64:

    Obviously, if you find NO value herein, you must have some pretty good advice of your own.

    Let's hear it.

  • Report this Comment On July 09, 2012, at 7:57 PM, lrecap wrote:

    " On July 01, 2012, at 7:43 PM, hbofbyu wrote:

    I don't think I have seen a day trader do it longer than 5 years making a living at it. Maybe a hobby but not a living. Does anyone know someone who has made a career of it? I would like to know.

    (It seems the only way they make money is by selling day-trading software or selling advice or a newsletter)"

    I asked, a response was:

    "just day trading or trading in general?"

    So, are you asking for just day trading???

  • Report this Comment On July 09, 2012, at 9:16 PM, GreenPhotog wrote:

    I love the 100 "points of light" but I disagree with Anand's no. 11: technical analysis is worthless. I see and hear again and again how the major averages and individual stocks are near resistance or support lines. Maybe this information is construed as "noise" but there are many stock experts who use charts, solely, to make their buying decisions. Otherwise, I think this is great stuff.

  • Report this Comment On July 09, 2012, at 9:27 PM, TMFMorgan wrote:

    <<but there are many stock experts who use charts, solely, to make their buying decisions.>>

    Most experts dramatically underperform index funds. This might be a good example of that.

  • Report this Comment On July 24, 2013, at 1:47 PM, jason1241 wrote:

    It is banking-centric because that are my specialty. For the folks interested in following along, it is not meant to become your diversified profile. If the banking sector passions you, information technology will be practical for thought generation. I started it in November 2011. So far the returns are shedding to their market. We'll see over that the ages in case I can reverse that. -Jason, editor for <a href="http://www.primeblog.us/">primeblog.us</a>

  • Report this Comment On October 31, 2013, at 1:33 PM, barbie15fletcher wrote:

    Timeshares need to be looked up as a purchase and not an investment. Regardless of how timeshares are presented, they don´t perform as well as a house or stock investment. If you look around the resale market for timeshares on websites like EBay, Redweek, or TUGBBS will find that you can buy a timeshare for far less money than what the first owner purchased it for:

    http://www.timesharescam.com/blog/58-is-timeshare-a-good-inv...

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