Define Your Habit: My Number 1 Rule
By June 8, 2021– Published on
Peter Brown, the founder of Canada’s largest independent bank, Canaccord Genuity, once told me, “If you want to win big, you’ve got to bet big”.
Rick Rule, formerly the face of Sprott US, told me, “Excess cash is the most valuable asset, it gives you the confidence to chase the high risk, high return speculations.”
Every successful investor has rules. Creating them is the easy part. Sticking to them is hard.
When I first started investing, my average order size was $1000. I was using a broker. He called me one day and said that I was wasting my money - I hadn’t calculated his commissions on my trades and failed to realize I was giving my first 10% gain away. I felt like such a rookie.
Instead of switching to a discount trading platform (there weren’t as many then, and none were free), I set to increase my average order size. I set a goal of $5000. The next year I set my eyes on $10,000. The following, $20,000.
After I read Nassim Taleb’s, Antifragile, I adopted the Barbell approach - all wealth distributed on opposite sides of the risk spectrum, with nothing in the middle. I organized my portfolio between cash / hard assets, and highly speculative opportunities. Now I keep enough on the conservative end to know that whatever happens on the speculative end, I’ll be alright. And when I win on the speculative end, I pull that cash into hard assets - the war chest.
“Is X going to go up?”
Way too frequently I get a call from a friend who mildly understands the business that I am in and they want to know ”what they should buy” - they’ve put aside $10K cash and hope to pick a winner. Or even worse - they’ve been following some forums on Reddit and feel like swing trading will be easy. It doesn’t work that way. Nothing works that way.
Finance has merged with social media and on the back of that marriage, an avalanche of nefarious investment influencers were born - quick to tell you about their recent gains, forever conspicuous about their losses. There is no sustainable quick buck, nor a sustainable shortcut. Anybody can get lucky once or twice, but that is not how real wealth is built.
Newcomers often make the mistake of looking at the market as a get rich quick scheme - a fatal mistake. The market - especially the speculative market where I specialize, is more frequently a go broke fast scheme, or a get rich slow scheme.
After spending a decade learning hard lessons in the market, building investment conferences all over North America, interviewing over 300 money managers, career speculators and macro finance experts on my YouTube Channel, I’ve pulled the most actionable takeaways into my own investment process.
My team has been prodding me to put this in writing and share it with our audience. I am reluctant, because I have a healthy skepticism of unsolicited advice… I enjoy sharing my experiences, but giving direct advice is a dangerous thing.
But the sudden abundance of investment “influencers” on Twitter, Instagram and Tik Tok is frightening, and I feel compelled to offer up some counter opinions.
There are no silver bullets, and no one size fits all best practices, but I have 8 rules that lead me to better decision making. When I am disciplined with them, I do well more often than not. When I abandon them, I end up suffering for it.
Discipline Equals Freedom
Tim Grover, strength and conditioning coach to Michal Jordan, the late Kobe Bryant, Duane Wade, Charles Barkley and several more of the greatest players to ever take the court was once asked if there was one common trait that separated the Greatest, from the merely great. He answered immediately - tolerance for boredom - the ability to apply pigheaded discipline to the monotonous repetition of practice. Practice into obscene redundancy, and then keep going. Practice when you hate it. Practice when you are already good. Practice when you know you don’t need it. Discipline, consistency and time, equals habit.
If you only want to focus on your portfolio when it is exciting, then speculative investing is not for you. There are dozens of resources and gurus that will sell you the quick hack - right now I am being retargeted by a well known online guru who promises to show me how to achieve “financial freedom in only 7 minutes per day”.
I need to make my position very clear. There are no shortcuts to the results we really want. There is no 7 minute portfolio that will change your life, as there are no 7 minute ab workouts that will make you look like the cover model.
Expertise is gained through a marriage of time and discipline - so my first rule, although boring, is also the most important: Develop Your Habit.
Determine how much time you have to invest in being an investor. If it is an hour a week, you probably shouldn’t speculate. An hour a day - you can work with that. My portfolio time is 5:00am - 8:00am, after-which my day runs away. This morning time is sacred. It belongs to me and my portfolio.
Knowing I have three hours a day forces me to invest accordingly. Three hours a day is not enough to be a day trader. It is not enough to be a swing trader. But in the hunt for value and long term holds, this time is perfect.
Understanding the time you have for your portfolio is crucial to determining everything else. If you want to improve as an investor, you need to invest time in investing. Like any skill, it can be a hobby, side hustle, part time focus or full time obsession, but you get out what you put in, and over time, nothing more.
Defining my investor habit was the turning point in my portfolio performance. This was the moment I moved from opportunist to investor. And as I set this habit in place, year after year, the results compound.
Discipline, consistency and time. Be patient. Trust your process.
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