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Master These Five Skills and Start Investing Fearlessly

By Dan Ferris, editor, Extreme Value
Wednesday, October 19, 2016

No matter how much research you do, you'll always reach a point when you must pluck up your courage and buy or sell.
Last month, I gave a presentation called "Invest Fearlessly" at the 2016 Stansberry Conference at the Aria Resort and Casino in Las Vegas.
I shared the five skills essential to your success in the market. Develop them now and they will give you the clarity and self-reliance you need to invest fearlessly. Let me explain...
The first skill you need is to be truthful with yourself. That means many things. First and foremost, it means asking yourself if you really have the temperament to manage your own investments.
After you get past that hurdle, you have to decide what you are. Are you a value investor? A day trader? You must have a real plan.
Next, you must learn how to think long term. You need a long-term perspective to overcome the emotional pull of the herd... especially near market tops and bottoms, where most people make their biggest mistakes and lose money.
It's hard to stay true to a winning strategy when it's underperforming without a good understanding of that strategy's long-term performance. You need to understand how money compounds over the long term. You also need to understand the history of price movements in stocks, bonds (interest rates), and important commodities, like oil and gold.
You must also learn negative thinking. Recognizing what you're doing wrong is a simple idea, but it's difficult to do.
You'll be smarter and more effective in the financial markets (and other areas of your life) if you spend more time trying to figure out what you're doing wrong than always trying to confirm that you're right. Many great investors advise negative thinking...
Warren Buffett says, "Rule No. 1: Don't lose money. Rule No. 2: Never forget Rule No. 1."
Billionaire trader George Soros says, "I'm always wrong. I'm always wrong, and I try to correct my mistakes. That is the secret of my success."
In other words, Soros is always trying to disconfirm any bad bets in his portfolio and get on the right side of the trade. If you can't sell your most cherished long idea or even go short on it if things change, you'll wind up with a portfolio full of financially draining emotional commitments instead of a portfolio full of winners.
Learn to think about all you don't know, figure out what you shouldn't do, and know when not to place a bet... Learn to disconfirm your ideas.
Finally, you must learn to approach investing as a business. The minute you decide to manage your own money, you start a business. Treat it like one. Embrace the four business-like investing principles in the last two pages of Benjamin Graham's classic, The Intelligent Investor: Know your business, run your business, make sure the odds favor a profit over the long term, and have the courage of your knowledge and experience.
That last point brings us full circle from where we started...
You can't be a successful investor without the courage of your knowledge and experience. False bravado won't cut it, either. You must base your courage on what you've learned. And no matter what the original source for your ideas, you had better do the necessary work to own them intellectually and emotionally before you buy.
Investing is like breathing. No one can do it for you.
Good investing,
Dan Ferris

Further Reading:

Read more of Dan's investment wisdom here...
"It's easy to figure out what to do about all this, but hard for most investors to do it... "
"Not losing money in stocks is more important than making it. You can't compound dollars that have died and gone to money heaven."
"The first thing to consider when selling your house is, 'How much will someone pay?'"

Market Notes


Today's chart showcases a rapidly growing restaurant chain...
Quick-service restaurant Domino's Pizza (DPZ) is one of the most popular pizza chains in the U.S. It controls 28% of the pizza-delivery market, and 14% of the entire quick-service pizza market.
One of the biggest factors in the company's recent growth is its mobile-ordering platform. The Domino's app is available for 95% of smartphones and produced an astounding $4.7 billion in sales last year. In the U.S., one in two Domino's orders was placed using the app.
The company is also busy rebranding itself, beginning with redesigning its core pizza recipe. It's also updating existing stores. And the transition is paying off... Shares are up almost 40% this year and just hit a new all-time high. Domino's will continue to profit as folks continue to use their phones to order food...

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