Like a baby taking her first steps, making your first investment takes a lot of preparation. But once you start moving, you'll find that it gets easier and easier to keep learning and gaining experience that will eventually make investing feel as natural to you as walking across a room.
During a bear market, though, the entire investing process seems intimidating to newcomers. When even professionals with decades of experience suffer big losses, it can seem next to impossible to become a successful investor. How do you overcome the fear of losing money in order to get on the path to financial success?
Stand with others
Just as an infant might grab onto a parent's hand to pull herself up, aspiring investors can learn a lot from watching how top experts invest. Different people use different investing strategies, but by looking at a variety of different techniques, you can figure out which one fits best with your mind-set and personality, as well as your financial goals.
Luckily, disclosure laws make it easy to follow the moves that professional investors make. Mutual funds and other institutions that manage assets have to release information about their stock holdings to the general public on a regular basis, and you can use that information to draw your own conclusions about how the best money managers think about what makes a good investment.
Going to the Oracle
One particularly useful source of investing knowledge is Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) chairman Warren Buffett. Each quarter, Berkshire releases its most recent holdings, allowing you to see firsthand what investments the Oracle of Omaha has made over the past three months.
For instance, last November, Buffett revealed steps he had taken during the third quarter of 2008:
- He increased his holdings of ConocoPhillips (NYSE: COP ) and NRG Energy (NYSE: NRG ) , in the wake of the plunge in oil prices that battered these and other energy stocks.
- He also upped his investment in US Bancorp (NYSE: USB ) , despite the ongoing crisis in financial stocks that would eventually push shares of the bank down more than 50% from their late-September levels. However, he also unloaded a substantial amount of his Bank of America (NYSE: BAC ) stock.
The nice thing about following Buffett is that he attracts so much attention that it's easy to find commentary about the moves he makes. That lets you compare and contrast the different conclusions various analysts draw from his actions.
Looking at funds
But there's an even bigger opportunity to learn from traditional mutual fund managers. While many funds release their current holdings every quarter or so, some funds give their investors more frequent updates on their investments. The more often you can see what a fund manager is buying and selling, the easier it is to detect patterns and preferences in the way the manager invests.
In addition, mutual funds often provide additional commentary from fund managers as part of their semi-annual and annual reports. Therefore, you won't just see changes in portfolio holdings; you'll also get explanations about why the fund did what it did and some general information about what the manager's view of the future looks like.
When doing research, don't just focus on winning funds. Also take a look at the losers to see if you can figure out what mistakes they've made. Watching Bill Miller's Legg Mason Value Trust (LMVTX) gives you a chance to kill two birds with one stone, as you can review both his 15-year period of outperformance as well as his recent slip after making large bets on Citigroup (NYSE: C ) and other financials.
As anyone with a toddler knows, once you stand on your own two feet, you'll never want to stop moving. As soon as you make that first investment, you'll wonder why you waited so long. So if you haven't bought your first stock or fund yet, now's a great time to get started -- so why wait another minute?
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