Success in investing

Success in investing is not easy, and in my opinion comes down to a couple of things.

Minimise your mistakes

Minimise your mistakes – you cannot entirely avoid them and you have to accept that.

Diversified Portfolio

Pick great companies for a diversified portfolio with good products and management teams

Decision Making

And then lastly, it is about psychology, avoiding your emotions play you and impact your decision making.

What has helped me is to use a strategy or call it a set of rules to help guide my decision making and avoid emotions taking over when they should not. I do not say you should adopt these, but this is what you get when investing in the portfolio and feel free to be inspired.

Principles

  • Only invest money I do not need the next 3-5 years, no leverage but fully invested in stocks
  • Long term buy to hold, compound interest is the life-changing ingredient
  • Buy companies and not “stocks”, companies and their products are made by people

Assumptions

  • The market goes up on in the range of 7-9% per year on average
  • There are market reductions to the tune of:
    • 10% every year
    • 20% every 5 years
    • 50% every 10 years
  • I CAN NOT TIME THE MARKET nor individual stocks (this is the hardest one!!!)

Approach

  • I select companies based on fit to long term business and society trends, management and what i call the “Heart Factor”, which is about investing in the future we want to create (see more below)
  • I want to be able to understand the company vision, their products and what they do for the customers
  • Have a portfolio of minimum 25 stocks, with an aim for an eToro risk score of 5-6. Each stock in the portfolio should have a minimum allocation of 1% of the overall portfolio.

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When selecting companies to invest in, I look at the following parameters as long term growth drivers.

Business and society trends

  • On-line business, digital- business and customer experience, scalable business models
  • Data business use for decision making and enablers; data centers, data volume, access & security
  • Vehicles of the future; Entirely or partly self-driving vehicles and what it enables
  • Gaming, mobile, VR/online, e-sport and digital entertainment
  • Sustainable future, ‘green’ energy, carbon/co2 emission reduction, full circle/recycling and waste management

Management

  • Management team, vision, business model effectiveness, consistency, crisis management
  • Employees & culture; engagement and innovation
  • Customer centricity
  • Product effectiveness, scalability and innovation

Heart factor

The reason companies are publicly traded is fundamentally to have easier access to capital from investors. So when we invest, we can see it as we ‘transfer’ money to the company we invest in. We invest in the organisation, the people in the companies and enable them to better grow and develop towards their vision by making capital available to them.

If we look at investing like this, and not as a game between traders of who can buy and sell and outsmart each other, we can more easily take the perspective of investing in companies that we want to be part of society when our children and subsequent generations grow up.

So this last factor is more binary for me, is a company actually doing good for society, their own people and helping make the world a better place? I only want to invest in companies where the answer to that question is a YES!