We had a 1.5 hr educational webinar on saturday at 9 pm. The recording is below
If you were unable to attend, please have a look at the slides via the link below or the recording.
Slide deck:Process beats Ideas_Final
In the last post, I wrote about three stages of an investor – The Beginner, Novice and Expert.
In the initial years as you learn, you will find books and courses to guide you through this evolution. After 8-10 years of this journey, if you are still investing actively and more importantly learning, you won’t find a nicely packaged curriculum to progress further
In college our learning is structured and guided by others. As an early expert – someone who knows a lot, you are now on your own and that is disorienting.
It is tempting to read more books, hoping to learn but you realize that you have reached the point of diminishing returns. You look for gurus, but soon realize that they are no different, though some sound confident online. Often these gurus are performing no better than you and make similar mistakes
Finally, the handful of super-investors who can teach you something are not accessible.
You have to develop your own learning process. There are no pre-defined guidebooks to do that, but some approaches which I will share with you
Mistakes as your guide
One of the most powerful ways to learn at this stage is reflecting on your process and mistakes. Let me explain
Once you have learnt the basics and become proficient, it’s time to start documenting your process and decision making. Write down the thesis, valuation estimate, your entry criteria, position sizing and so on. Finally, when you exit the position, review what happened versus what you expected
Reflect on what went wrong, what you got right and what you missed. Go back to your process and refine it. You have to keep doing this to keep learning
Teach others
The other well known way to learn is to teach others. Write about it, make online videos or take classes for other investors
When you make your knowledge explicit, you teach others as much as you teach yourself. You find gaps in your knowledge and can fill those gaps
I accidentally stumbled into this through my blog and have been learning/teaching others for 20 years. My plan is to expand this further
Jump boundaries
I realized this aspect of learning in 2019 when I found gaps in my understanding of the market and was unable to explain some of my failures. As I reflected on these mistakes , I started studying other types of investing. This led me down a rabbit hole of swing and position trading, Momentum investing, Quantitative and Technical analysis and more
I am still a value investor at heart, but have incorporated the core principles of these approaches into my process
Keep an open mind
This is the key to your learning process. Do not think of yourself as an expert who knows it all. Always consider yourself as a beginner – in other words, keep your ego out. Be open to learning from other investors including ones who are much younger than you
I follow all types of investors as they bring fresh ideas and new approaches which sometimes don’t make sense to me. Whenever I am confused or find something is working but doesn’t make sense to me, my instinct is not to dismiss it but to dive deeper into it
That’s the reason I am obsessed with AI and other new technologies these days. I get energized when I find something new to learn and that gets me to the final point
To develop as an investor, you must love the process of learning and getting better at your craft each day.
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I am a big believer in continuous learning. As an investor, that is the only sustainable edge over the long run. To beat the market, you have to put in the work. There is no seniority in the market where you can coast along based on your past laurels
Learning for the beginner
For beginners it’s much easier – Books. Pick up a few books on accounting, business, finance etc and learn the basics. For someone diligent, this would take a year or two on average
Don’t worry about finding the best books on these topics. Just google the top 5 books in each area and start reading. If you have a question on some topic, get a cheap subscription to Chatgpt or some other LLM and work with it. Ask those questions to the LLM – It is a wonderful tutor on any topic
Learning for the novice
Once you know the basics, don’t look for a magic course or a silver bullet to make you proficient in the market. You will find a lot of courses which promise to make you the next Buffett or expert trader with very little effort. They are all scams
If you must use a course, it should be to learn the basics and even there, most courses are mainly a condensed version of books. So, use these courses to speed up the learning process
Once you are past the basics, the best option is to dive in. Based on your preferred approach, start analyzing companies. Make a lot of notes as you filter ideas and deploy money in them. Keep in mind that you will make mistakes in the beginning.
Start small so that you can keep the tuition fee low
At this stage, seek out mentors. If you find someone who is willing to take you under their wings, you have hit the jackpot. Do the best to learn from your mentor, but at the same time be critical enough not to take everything your mentor tells you as the absolute truth
I have had a lot of mentors from whom I have learnt but have never spoken to them. In my case, it has been by reading and re-reading what they have written. It’s amazing how much you can get just by doing that
This stage can last years but as you keep doing it, you will progress in your understanding of how to invest and will improve your returns
Learning for the expert
In a few years, you will start feeling like an expert. If it coincides with a bull market, you will even feel like a genius. You will start entertaining ideas of quitting the market and becoming a full time investor. At this stage you will proudly display your results on social media
And then the bear market will hit and wipe a good chunk of your gains
That’s when you will realize that there are no gurus or gods in the market. Everyone is learning and figuring it out every day.
If you accept that continuous learning is the only way to keep doing well in the market, then this stage is both exciting and problematic. It’s problematic because there are no books or courses which can teach you everything, but you still have to figure out a way to learn
At this stage, you are your own teacher who has to design his own course and figure things out. You can reach out to new mentors – but often these will be in targeted areas. For example, if you want to learn more about a sector, find someone who has in depth understanding of it. You can find such people on social media – read what they write, ask them questions if you can
The same goes for any new area you are exploring. In such cases you are a novice. If you find yourself in that position, celebrate that situation. You have a beginner’s mind and can now experience the same feeling of doubt and confusion you felt when you started. That is the start of a new phase of rapid learning
In my next post I will dig deeper into how you can design your own learning process once you have mastered the basics