Reading the book ‘Free Capital: How 12 private investors made millions in the stock market’. There are a few similarities that most of these investors seem to share which I wanted to briefly explore.
1 – They all had different investing strategies, but they all not only focussed on how much money they could make, they focused on how much they could lose. Even though there are many ways to make money, there are a few main ways you can lose money.
2 – Most of the investors made a conscious call early in their lives to live within or below their means. Other than home loans they had very little debt. This allowed them to become full time investors quicker as they didn’t have to make large sums of money to fund their lifestyle.
3 – Most of the investors started full time investing later in life. They worked through their 20s and 30s while learning how to invest on the side. This allowed them to continue to learn from their mistakes and improve while their jobs paid the bills.
4 – They majority of the investors didn’t grow up always wanting to be investors. Their negative experiences in the corporate world drove them to focus more and more of their time on tightening their investing skills, rather than trying to climb the corporate ladder.
5 – Most of the investors understood that luck had a role to play in their success. This allowed them, in my view, to keep their profits in the long term. Humility was definitely a factor for pretty much all of the 12 investors.
6 – By keeping their losses small, it was really a few big winners that made the majority of their money. This just goes to show that a few stocks can really make your year or even decade. By focusing on limiting losses, they were able to let their winners run.
Kudos to Guy Thomas for this great book.
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