When it comes to investing, knowing what you need to know is more important than just knowing things.
You Don’t Need to Have an Opinion on Every Stock or Investment
One of the things that successful investors tend to have in common is that they do not have an opinion on every stock in the Universe.
The major brokerage firms, asset management groups, and commercial banks seem to feel like it is necessary to attach a rating to everything security that is traded.
Some popular financial talk show hosts take pride in espousing their view on virtually every business that’s traded.
While this can be useful when looking at corporate bonds and discovering whether they trade more toward the AAA rating or junk bond side of the spectrum, in a lot of cases, this obsession with metrics is somewhat nonsensical.
Investing is not an exact science. Paraphrasing two of the industries’ priests, you don’t need to know a man’s exact weight to know that he is fat, nor do you need to know a basketball player’s exact height to know he is very tall.
If you focus on only acting in those few instances where you have a clear winner and watch for opportunities that come along every once in a while, sometimes years apart, you are likely to do better than the Wall Street analysts that stay up nights trying to decide if Union Pacific is worth $50 or $52.
Instead, you wait till the stock is trading at $28 then pounce. When you find a truly excellent business, you are often best served through near total passivity and holding until death.
This approach has minted a lot of secret millionaires, including janitors earning near minimum wage and sitting atop $8,000,000 fortunes.
Why do investors find it so hard to admit that they don’t have a clear-cut opinion about a specific business at the current market price? Often, pride and, to some degree mental discomfort over the unknown, is the culprit.
For more information on how to overcome these forces, read Rationality: The Investor’s Secret Weapon.
想要获取更多关于如何克服这些阻力的信息，请阅读《Rationality: The Investor’s Secret Weapon》。
Know Every Company (Or at Least, a Whole Lot of Them!)
Even if you don’t have an opinion on the specific attractiveness of most stocks at any given moment, you should know as many businesses as you can across as many sectors and industries as you can.
This means being familiar with things like return on equity and return on assets.
It means understanding why two businesses that appear similar on the surface can have very different underlying economic engines; what separates a good business from a great business.
When asked what advice he would give a young investor trying to enter the business today, Warren Buffett said that he would systematically get to know as many businesses as he could because that bank of knowledge would serve as a tremendous asset and competitive advantage.
For example, when something happened that you thought would increase the profits of copper companies, if you knew the industry ahead of time, including the relative position of the different firms, you’d be able to act much more quickly and with a much more complete understanding of the full picture, than if you had to become familiar with not only the industry but all of the players within it over a compressed period of time.
(Realize that there are no shortcuts for this step if your aim is mastery. When the host of the television show responded to Buffett, “But there are 24,000 publicly traded companies!” Warren responded, “Start with the A’s”).