I often wonder why more Australians don’t adopt an investment mentor. Many are lucky enough to have business, sporting or life skills mentors but most don’t even think of an investment mentor. Here’s why I think we should!
A mentor is someone who you admire and value for their guidance and advice … not necessarily personally, but by observing or researching their behaviour. Understanding what makes them tick.
Any serious investor devours the writings of legendary US investor Warren Buffett and some even make the annual trek to the Berkshire Hathaway annual meeting in the US to hear the great man speak.
The world’s second-richest man, behind Microsoft’s Bill Gates, espouses many powerful but simple messages which have helped a legion of investors.
7 successful Australian investor tips
There are very few popular Australian investment gurus who we are able to follow as ordinary investors.
Years ago, I read a terrific book called Masters of the Market (by Anthony Hughes, Geoff Wilson and Matthew Kidman) which interviewed 13 of Australia’s best sharemarket investors. Those gurus who have built a reputation for consistent performance and the ability to sniff out the sharemarket winners of the future.
I think the book is now out of print, but there were a number of common themes which make a successful investor:
- Set a strategy: Understand what you want your portfolio to achieve and then develop a strategy to meet the criteria … whether it be income, growth, small companies, big caps, whatever.
- Discipline: Have the discipline to stick with the strategy no matter what the conditions. This doesn’t mean there isn’t room to refine a portfolio, but wholesale, knee-jerk reactions to a change in conditions are definitely out.
- Research, research and research: These professional investors work like Trojans to find out everything there is to know about a company, its management, market, competitors and future before they make an investment. It’s no surprise that the most successful investors work the hardest on understanding the stocks they’re buying.
- Passion for the business: Successful investors understand they are not investing in a stock, they are investing in a real company. They understand a company so well that once they invest, they are passionate about it.
- Take a considered approach: While they may be passionate about a stock, they aren’t blinkered or wearing rose-coloured glasses. Successful investors will admit mistakes, try to limit the financial damage and move on.
- Take profits: A professional investor will be happy to sell down some of their stake in a company to bank a profit. They never regret the decision if the share price keeps going up. They are happy with their profit and don’t begrudge the next investor making money.
- Buy straw hats in winter: Because they put the work into researching a company, the professional investor will be happy to buy into a stock which is out of favour with the rest of the market.
In the absence of an investment guru you know personally and in real life, you can seek out those you admire (like the great Warren Buffett). Read their books, listen to their podcasts, follow their socials and try to find the right investment mentor for you.
Just like a career mentor can help you to make smart job moves to progress you professionally, an investment mentor can help you to make good sharemarket and investment choices and progress your wealth building. Even if you are basing this on what they would do by learning their strategies, mindset, and approach to risk, over time, you’ll start to develop your own investing philosophy. But one that’s shaped by the wisdom of those you respect – your money mentors.
The key is to stay curious, keep reading and learning, and remember, every great investor was once like you. Starting out and keen to grow – not just their wealth but also their ability to make smart investment decisions, to read the market, and make a move at the right time.
An investment mentor – or mentors (if you follow a few and it’s good that you do) – can really help you on your quest to become a successful investor.
