The Winning Investment Habits Of Waffren Buffet & George Soros

The Winning Investment Habits Of Waffren Buffet & George Soros

23 The Master Investor

The Losing Investor

1. Preservation of Capital Is Always Priority No. 1

Believes his first priority is always preservation of capital, which is the cornerstone of his investment strategy.

Has only one investment aim—“to make a lot of money.” As a result, often fails to keep it.

2. Passionately Avoid Risk

As a result (of Habit No. 1), is risk-averse.

Thinks that big profits can only be made by taking big risks.

3. Develop Your Own Unique Investment Philosophy

Has developed his own investment philosophy, which is an expression of his personality, abilities, knowledge, tastes, and objectives. As a result, no two highly successful investors have the same investment philosophy.

Has no investment philosophy—or uses someone else’s.

4. Develop Your Own, Personal System for Selecting, Buying, and Selling Investments

Has developed—and tested—his own personal system for selecting, buying, and selling investments.

Has no system. Or has adopted someone else’s without testing and adapting it to his own personality. (When such a system doesn’t work for him, he adopts another one—which doesn’t work for him either).

5. Buy As Much As You Can

Does not believe in diversification; always buys as much as he can of an investment that meets his criteria.

Lacks the confidence to take a huge position on any one investment.

6. Focus on After-tax Return

Hates to pay taxes (and other transaction costs) and arranges his affairs to legally minimize his tax bill.

Overlooks or neglects the burden that taxes and transaction costs place on long-term investment performance.

7. Only Invest in What You Understand

Only invests in what he understands.

Doesn’t realize that a deep understanding of what he is doing is an essential prerequisite to success. Rarely realizes that profitable opportunities exist (and quite probably abound) within his own area of expertise.

8. Refuse to Make Investments That Do Not Meet Your Criteria

Refuses to make investments that do not meet his criteria. Can effortlessly say “No!” to everything else.

Has no criteria; or adopts someone else’s. Can’t say “No!” to his own greed.

9. Do Your Own Research

Is continually searching for new investment opportunities that meet his criteria and actively engages in his own research. Likely to listen only to other investors or analysts whom he has profound reasons to respect.

Is looking for the thousand-to-one shot that will put him on easy street. As a result, often follows the “hot tip of the month.” Always listening to anyone styled as an “expert.” Rarely makes a deep study of any investment before buying. His research consists of getting the latest “hot” tip from a broker, an advisor—or yesterday’s newspaper.

10. Have Infinite Patience

Has the patience when he can’t find an investment that meets his criteria to wait indefinitely until he finds one that does.

Feels that he has to be doing something in the market at all times.

11. Act Instantly

Acts instantly when he has made a decision.

Procrastinates.

12. Hold a Winning Investment Until There’s a Predetermined Reason to Sell

Holds a winning investment until a predetermined reason to exit arises.

Rarely has a predetermined rule for taking profits. Often scared a small profit will turn into a loss, so he cashes it in—and regularly misses giant gains.

13. Follow Your System Religiously

Follows his own system religiously.

Continually “second-guesses” his system—if he has one. Shifts criteria and “goalposts” to justify his actions.