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24 Rules For Life – And Investing

Published 2018-05-08, 01:05 p/m
Updated 2023-07-09, 06:32 a/m

A day in the life of an investment analyst typically involves trudging through a lot of information. For better or worse, given the wonders of connectivity, there’s little that any of us aren’t privy to these days. Contrast this to the days when you had to formally request a company’s annual report, and you start to understand how much this industry has changed over the years.

The vast majority of “stuff” that we come across in a day is more or less in one ear, out the other. As much as the financial media would love for you to think it matters, and they try their hardest to make it so, it just doesn’t.

I’ve been in this industry for almost 20 years now, yet it’s only been in the back half of this timeframe that I’ve learned that the ability to ignore is perhaps one of the most important that one can develop. Jewels do surface, however, in the daily flow of information that crosses the screen, and I’d like to share a recent example.

Richard Jenrette, who I admittedly had not heard of until last week – was an investment banker and co- founder of the firm Donald, Lufkin and Jenrette. The firm was founded in 1959 and grew to employ about 11,300 people when it was sold to Credit Suisse (SIX:CSGN) in 2000 for the princely sum of $11.5 billion. With four decades of Wall Street under his belt, Jenrette passed away last week at the age of 89. After he passed, a note was found on his desk. It contained 24 pearls of wisdom that Jenrette seemingly leaned on to navigate the ups and downs that
life brings. This collection is included below, and I’ve added some interjections throughout to help tailor the list more towards the topic of investing.

Lessons for life, and investing, all in one…..

What I Learned (How to Succeed) (and have a long and happy life)

1. Stay in the game. That’s often all you need to do. Don’t quit. Stick around! Don’t be a quitter!

The angle that comes immediately to mind as it pertains to investing is the use of a stop-loss order. We do not encourage the use of this mechanism because it can take you out of the game, frequently at entirely the wrong time. We preach patience and business-first investing here at the Motley Fool, which means a long-time horizon is paramount for success. Selling a wonderful company merely because the associated stock price has moved lower is almost non-sensical in this context.

2. Don’t burn bridges (behind you)

As a young analyst, I spent a lot of time trying to convince a collection of veteran portfolio managers to invest in companies I’d deemed worthy. Granted, I was rather green, but this became somewhat of a flabbergasting process. These portfolio managers would drag up what I viewed as anecdotal pieces of dirt from years ago that they recalled about many of these companies. Thus causing them to disregard my ideas entirely, even if those pieces of dirt were entirely irrelevant. Which, I might add, was often the case. Their “burned bridges” approach resulted in them missing out on some great advice!

3. Remember – life has no blessing like a good friend!
– You can’t get enough of them
– Don’t leave old friends behind – you may need them

This can tie back to the information overload that we face in the investment world. Pick your sources and stick to them. Ignore everything else. And this is where the Fool’s members-only advisory services come into play. Myself and the rest of the investing team wake up every day trying to be our member’s friends, so to speak. At least when it comes to their journey through the world of investing. Our goal, to help you invest – better.

4. Try to be nice and say “thank you” a lot!

This stands quite nicely on its own.

5. Stay informed – Keep learning.


6. Study. Stay educated. Do your homework. Keep learning!

These two are obviously related and are one of, if not the most important components to becoming a successful investor. Though I mentioned you can ignore much of what rolls through, there’s a lot that you can’t ignore. And if you’re not willing to put in the time and effort it takes to read all that you should – company reports are a prime example – I suggest that you probably shouldn’t be investing on your own.

7. Cultivate friends of all ages – especially younger

I believe this pertains to exposing yourself to a wide variety of viewpoints and opinions. Something that’s absolutely paramount to becoming a better investor. Our collection of writers at Fool.ca do a great job of providing loads of opinions on a wide number of Canadian stocks. And we give them free reign to do so. But these opinions won’t always jive with the opinions held within our members-only advisory services, like our flagship Stock Advisor Canada (which I head up). In our mind though, this helps to provide a more rounded, and ideally better end decision for those willing to consider multiple viewpoints.

8. Run scared. Over-prepare

This goes back to reading. If you own a company’s stock and have not read at least one of that company’s annual reports, you aren’t prepared to own that stock. So many of us see a compelling clip about this company or that in some far-flung corner of the internet or on TV, and immediately open our brokerage account to buy several hundred shares. Don’t do this! Slow down. Explore. If it truly is a compelling idea, it’ll be just as compelling in a few days time. After you fully understand what it is you’re investing in.

9. Be proud but not conceited. Know your own worth.

Nothing to add.

10. Plan ahead but be prepared to allow when opportunity presents itself.

My colleague Jim Gillies uses the phrase “always have a plan.” And it’s bang on. There’s a few angles to consider:

1) Before you buy a stock, imagine what it’s going to feel like when (not if) that stock is down 30%.

2) Develop a thesis for every investment you make and constantly testing that thesis to ensure it holds. It's a great rule-of-thumb to hold near and dear.

11. Turn problems into opportunities.

Very often it can be done. Problems create opportunities for change. People should be willing to consider change when there are problems.

Problem: The stock market has declined by 20%, many of my holdings are down even more.

Opportunity: All of these companies that I’ve been dreaming of buying are all of a sudden so cheap! It may sound rather contradictory, but massive stock market gains tend to be born in bear markets. Prepare accordingly! Diversify your portfolio so that you’re able to swing for the fences when (not if) this
scenario develops.

12. Present yourself well. Clean, clean-shaven, dress “classically” to age. Beware style, trends. Look for charm. Good grammar. Don’t swear so much – it’s not cute.

Stands alone.

13. But be open to change -- don’t be stuck in mud. Be willing to consider what’s new but don’t blindly follow it. Use your head and common sense.

Warren Buffett has famously dismissed technology stocks in the past. Today, he calls not investing in Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) (Google’s parent) some of the worst moves he’s ever made. It’s easy to make sweeping generalizations, but not necessarily lucrative. Good businesses can lurk even in the most unlikely of places.

14. Have some fun - but not all the time!

Educate, amuse and enrich – founding principles here at the Motley Fool! If you don’t find investing fun, find somebody that does and get them to at least help you out.

15. Be on the side of the angels. Wear the white hat.

When an investment goes bad, we tend to get angry. Generally speaking, though, if it was us that either green-lighted the transaction, or pulled the trigger ourselves, we’ve nobody to blame but ourselves. Perfect information does not exist. After all, we’re dealing with predicting the future here and nobody has a crystal ball. You will be wrong. Acknowledge it, and ideally learn from it. There are plenty of lessons to be learned when it comes to investing. With the best ones tending to arrive at the hands of a losing position.

16. Have a fall-back position. Heir and the spare. Don’t leave all your money in one place.

I’m a huge proponent of holding a cash position in one’s portfolio. In my mind, cash is the ultimate fall-back position. Even though it doesn’t earn you anything in the short- or even medium-term, cash can be hugely profitable when the market goes for an inevitable belly flop.

17. Learn a foreign language.

18. Travel a lot – around the world, if possible.

We Canadians tend to be home bodies when it comes to investing. Thing is, the Canadian market is very narrow and our options are relatively limited. Our investing gaze should at least be cast into the U.S. market for potential ideas, which is exactly why we provide one Canadian and one U.S. recommendation
every month in Stock Advisor Canada.

19. Don’t criticize someone in front of others.

20. Don’t forget to praise a job well done (but don’t praise a poor job)

21. I don’t like to lose -- but don’t be a poor loser if you do.

22. It helps to have someone to love who loves you.

23. Keep your standards high in all you do.

(Head nodding in agreement at all five, but nothing really to add.)

24. Look for the big picture but don’t forget the small details.

This one is entirely applicable to investing and pretty much writes itself.

Foolish Bottom Line: Investing doesn’t have to be hard. Yet, for many of us, it is. Keep things simple and find that having a collection of underlying principles and a philosophy to work from bridges a significant gap, making this game a whole lot easier to play.

Iain Butler, CFA
Chief Investment Advisor, Motley Fool Canada

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