J#7: How going against the popular wisdom made me a FORTUNE and honed my investment process
There are several lessons we can learn and use in our investment process from my triple-bagger shophouse investment experience (which if you recall has made me well over a million dollars). They are:
Lesson 1: Break free from your traditional mindset. Look where others are not looking or places that others dismiss as places not to invest.
If you recall, I was the only bidder on the shophouse, what others apparently saw as a poor place to invest, I saw as a gem. Along these lines, first and foremost, I hope that you break-free from your usual “home market” bias. Most investors tend to look only at their own country’s stock market or the major markets, such as the United States, out of familiarity and watching CNBC. It is a big world out there with plenty to learn and invest in. Unless you “pop the hood” and explore something different you will never find the “gems” that are “hiding” in plain sight out there.
For example, here at Double Digit Dividends, we shall be taking you to South Africa (via an Australian Securities Exchange-listed company) for our next investment recommendation. We have gone to Tanzania, Africa with Twiga Cement. Paradoxically, you may well come to the conclusion that it is far safer and more profitable to invest in Africa than the so-called “developed” world which has negative interest rates and massive debt.
I hope we are part of the process of breaking you free from the traditional mind-set and being pulled by those wild horses Plato referred to (see Journal 4).
As you are aware, one of my motivating reasons for this publication is to pass the lessons I learnt to my children. To my children, I hope you will travel broadly and engage with as many people as you can and not be dragged by those damn wild horses!
Lesson 2: Keep practicing your investment decision-making process.
When you make an investment, or any, decision you need a sense of confidence that it is the right decision.
My shop-house purchase decision took only 30 minutes to make. But truth be told, it took many years (and many mistakes) to be able to do that.
Buffett is quoted as stating he can analyse in most cases whether a company is worth investing in within 10 minutes. Just like my shophouse purchase decision was made in 30 minutes, this can happen but requires practice.
Here at Double Digit Dividends we screen and evaluate about 15 investments a month. We then do the recommendation write-up. You soon start to see a pattern in our thinking and hopefully, you will build that “muscle memory” (actually the brain is an organ) for the investment evaluation process.
Investing, I believe, should not be based on writing a 100-page investment thesis as do some of the investment banks. If you cannot understand or express the idea in less than 10 pages, your investment decision “muscle” memory is too complex.
I would also occasionally like to share with you our near misses. That is, companies we nearly recommend but which failed to meet the thresholds. We will also develop a watch list of stocks we like, but for which the price is not quite cheap enough. We hope this, our recommendations, and these journals, will help to enhance your investment decisions skill set.
Lesson 3: Act decisively.
Once you have reached your decision, ACT!
You don’t earn money unless you cross that starting line! If I did not go to that shophouse auction and put my hand up when the price was called by the auctioneer, it would be just an academic experience.
Mark Tier, in his book “Winning Investment Habits of Warren Buffett and George Soros,” stated the same lesson — once you have reached your decision, ACT decisively. My business partner, Tim Staermose, contributed to writing the book which went on to become a best seller (Finance category) in China. Mark’s book can be found here. It is good reading.
Lesson 4: Build the Infrastructure.
Our recommendations are worldwide. Ensure that you have one or more brokers, or online platforms that can invest in many markets. Have those accounts funded and communication lines established so that when you do have to place your order, there is one less hurdle.
In some markets, such as Tanzania, you may not be able to execute through your full-service broker or an online investment platform. You’ll need a local broker. If you require information, please drop me a note and I can point you in the right direction.
Lesson 5: Always remember it is God’s money.
Again, no, I am not super religious, but treating it as God’s money is a key factor in using it wisely. More to follow in journals ahead.