Investment is a marathon of life, and we must persist to the end. In section 1-1, of my book “The Rules of Super Growth Stocks Investing”, I pointed out 8 key points of a simple roadmap for stock investment for investors; the sixth item is “Independent thinking” — Develop the habit of reading, analyze and judge based on facts, ignore all kinds of forecasts or investment reports, turn off your TV and finance station, and then spend a fixed amount of time every day doing homework by yourself.
How important is independent thinking
Ayn Rand’s famous saying “Wealth is the product of man’s capacity to think.” In the postscript chapter of my book “The Rules of Super Growth Stocks Investing”, I mentioned that “You will never earn any money beyond your cognition.” this is why the bankruptcy rate of American lottery winners in the past 20 years is as high as 75%, or 60% of NBA stars will go bankrupt within 5 years of retirement.” The reason is simple, because you have no ability to possess the wealth beyond your ability.
Investors need to think independently
General George Patton famously said, “If everyone is thinking alike, then somebody isn’t thinking.” Benjamin Graham said, “There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently. “Investment wants the ultimate success, and the principle of running any business is the same. Buffett once expressed similar statements like: “We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity.” All the great investors in history, the three things they continue to do every day are repeated reading, researching, and thinking; no exceptions.
Excessive return can only be achieved through deep thinking
One of the most important statement, Howard Marks said in his most famous book “The Most Important Thing” is that the biggest difference between successful investors and ordinary people is that they need to have “Second-level thinking”, which is the so-called “Insight” in Chinese. If there is no insight that differs from others, and it is impossible to obtain excess returns—because the market already reflects the opinions known to all investors involved in the market.
If investors can get ahead of others and find out the intrinsic value that most people have not yet discovered; the market will eventually reflect the true intrinsic value of stocks, but the premise is that you have to have different thinking and insights from others, rather than dreaming or dreaming, or your wishful thinking, This is why George Goldman (pseudonym Adam Smith) said, “The stock doesn’t know you own it,” and certainly stock market doesn’t care about your personal opinion.
Thinking cannot be outsourced
“Thinking cannot be outsourced.” This sentence is really classic. Why do I always emphasize that investors have to spend a fixed amount of time every day to do their homework, instead of reading other people’s investment reports? The main reason is: because it is the product of other people’s thinking. No matter how good and reasonable the report of the person you read is, it is not your own thinking and will not help you in the long run.
Make your own destiny
David Rubenstein, co-founder and executive chairman, The Carlyle Group (ticker: CG) said “They (great investors) like to make the final decision. They don’t want to delegate the decision and when they make a bad decision, they own up to it and get onto the next thing.”
Regarding the importance of thinking, I suggest you refer to my two other blog posts:
- “Do investing homework by yourself: Necessary conditions for successful investment trilogy“
- “Investing requires breadth of knowledge, not depth as most people think“
- “What does the investment mentality include? 》
- “Why is portfolio rebalancing unreasonable“
- “Efficient market“
- “Why concentrated Investment?“
- “Most investors should invest ETFs tracking broad market“
- “US issued ETFs tracking US market is your best bet“
- “Why long-term investment is better?“
- “Investors should pay attention to the annualized rate of return (IRR), How to calculate?“
- “Any strong reason to buy mutual fund?“
- “Thinking cannot be outsourced“
- “People believe successful investors are survivorship bias cannot succeed“
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.