• HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT
Tamim Asset Management
  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT

Market Insights

6  Money Making Secrets For Equity Investors

19/9/2018

0 Comments

 
The small cap team take a look at six key money making "secrets" that any investor needs to know based on the powerful world of behavioural finance.
SUMMARY
​

Investor psychology is arguably the biggest determinant of long term investment success, and has a greater impact upon long term investment performance than even asset allocation or stock selection. In this article we look at 6 money making secrets based upon the powerful world of behavioural finance. 
​“Investing is not the study of finance. It’s the study of how people behave with money. And behaviour is hard to teach, even to really smart people. You can’t sum up behavior with formulas to memorise or spreadsheet models to follow. Behaviour is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves. The finance industry talks too much about what to do, and not enough about what happens in your head when you try to do it.” - Morgan Housel, Collaborative Fund
​We agree and believe that understanding behavioural finance is the difference between good and great long term performance. Most people are far more comfortable studying finance as an objective and defined subject but in our experience their time would be better spent looking at themselves and how they make their investment decisions. 
1. Become aware of and then let go of everything you think you know
“The more you know, the more you know you don’t know.” - Aristotle
We all believe that our life experiences provide us with an accurate picture and understanding of how the world actually is and has been in recent times. However, this could not be further from the truth. We all experience our own experiences and have very little understanding of what has been happening for the 8 billion other humans on the planet at the same time. In other words, our historical experiences are extremely inaccurate as a general guide as to what will happen in the future. As a result, one of the most productive behavioral strategies is to become more aware of your own historic biases and start discounting them as far from accurate. In other words, by under-standing that you don’t know nearly as much as you thought you did, you are freeing yourself up to build a far more accurate picture of the investment world today. This is why some of the world’s most successful investors are also very humble people. 
2. Remain optimistic - don’t let the pessimists spoil your day
“I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” - John Stuart Mill
​How many articles have predicted global recessions since the last global financial crisis? The answer is a lot. On a deep psychological level we are programmed to listen to all warnings of bad news coming; our survival instinct makes us sit up and listen in case the information we are hearing could help us survive. This is very reason the vast majority of news stories are so negative. 

However, the reality is that no one knows what is going to happen in the short, medium and long term. No one, including all the market experts. 

Having said that and recognising that markets will go up and down like they always have, it is worth remembering that the long term global market trend has always been up as the global economy has always grown over time. So why worry about a multitude of uncontrollable factors when the long term trends are supportive?
3. Remember and try to understand the eighth wonder of the world: compound growth
"Linear thinking is so much more intuitive than exponential thinking.” - Michael Batnick

"The greatest shortcoming of the human race is our inability to understand the exponential function.”
- Albert Bartlett, Physicist ​
​Most of us have probably seen compound growth tables and are aware of the incredible power of compounding, but do we really appreciate it? One of the main challenges with truly understanding compounding is that the maths often doesn’t make intuitive sense; the numbers just look too large when compounding has occurred for some time so most of us discount the concept of compounding as no more than a great story to explain why we should all invest for the long term. 

However, in our experience compounding deserves a lot of attention with a view to making it a core investment philosophy. Great investment returns are achieved by generating good returns on a recurring, long term basis and letting the incredible power of compounding do the rest of the work for us. 
4. Let go of social proof when investing
“Opportunity is almost always inversely correlated with popularity.” - Morgan Housel, Collaborative Fund
​In our experience, very successful investing often requires the ability to think quite differently from the crowd, to be truly contrarian. However, the reality of being a contrarian means not being agreed with by many others, and often having a polar opposite opinion to many highly intelligent people. How many people have the ability to be constantly told they are wrong and to then take the contrarian action anyway? It is a rare skill set which takes many years of developing. 

In our experience, the key step here is let go of social confirmation of what you are thinking as it becomes much harder to go against the herd when the herd keeps telling you that you are wrong. 
5. Stop looking for something to do - inaction is your friend as an investor
“Our favorite holding period is forever” - Warren Buffet
​Most people are used to thinking that hard work involves taking action, and they tend to bring this way of thinking into their investment philosophies. As a result, most investors are actually traders these days. And it is completely understandable why this is the case -in a world where information is available on every device imaginable on a second by second basis, and where trading can be done at the push of a button, the temptation to trade is greater than ever. 

However, in our experience the best and most successful investors are the ones who are content to wait and do nothing whilst their investments work for them. 

Stop looking at your stock prices, stop feeling tempted to trade. Let the investments do the work for you. 
6. Remember to include a significant margin of safety
“The purpose of the margin of safety is to render the forecast unnecessary.” - Benjamin Graham
​It can be very tempting as an investor to assume that your expectations of the future are spot on. After all, you have done your research and know more about this company than the vast majority of investors. Does this mean you know what is going to happen? Unfortunately not, no one knows what is going to happen - even the best analysts in the world cannot predict the future. 

As a result, it is always advisable to factor in a significant margin of safety into all investment decisions. Hope for the best but assume the worst, and if you are still likely to make money in that worst case scenario, you are likely to perform very well over the long term. 
CONCLUSION
​

Investment behaviour is arguably the biggest determinant of investment performance so becoming more aware of your own biases and challenges is likely to prove lucrative. We believe taking control of our investment behaviour will have a greater impact upon your long term performance than any other factor including what happens in financial markets. 
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Markets & Commentary

    At TAMIM we are committed to educating investors on how best to manage their retirement futures.

    Sign up to receive our weekly newsletter:

    * indicates required

    TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.

    Archives

    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    July 2016
    June 2016
    March 2016
    February 2016
    January 2016
    December 2015

    Categories

    All
    Accounting
    AGM
    Amazon
    APRA
    Asia Small Cap
    Asset Allocation
    Aus Equity All Cap Value Portfolio
    Aus Equity Income Portfolio
    Aus Equity Small Cap Portfolio
    Australian Banks
    Australian Market Commentary
    Banking Royal Commission
    Big 4 Banks
    BNPL
    Brexit
    Budget
    China
    Corporate Governance
    Correlation
    Cryptocurrency
    Currency
    Darren Katz
    Dividend Yields
    Election
    Emerging Markets
    Energy
    GDP
    Global Equity High Conviction Portfolio
    Global Mobility
    Gold
    Guy-carson
    Housing
    Income Investing
    Inflation
    Infrastructure
    Insurance
    Interest Rates
    International Commentary
    Investment Thematics
    Investor Psychology
    Israel
    Japan
    Katz's Corner
    Kevin Smith
    Market Outlook
    Mergers-aquisitions
    Mobility
    Oil
    Passive-vs-active
    Peer-to-peer-lending
    Peertopeer-lending
    Portfolio Management
    Portfolio-management
    Private Debt
    Property
    Rando's Reflections
    RBA
    Recession
    REITs
    Reporting Season
    Retail
    Risk Management
    Robert Swift
    Ron Shamgar
    Small Cap Income Portfolio
    Small Caps
    Succesion Planning
    Telecoms
    The Pain Report
    Trade War
    Trump
    Value Investing
    Video
    ZIRP

    RSS Feed

TAMIM | Equities | Property | Credit
​

TAMIM Fund
Australia All Cap
Australia Small Cap Income
Global Mobility
Global High Conviction
Credit

Listed Property
TAMIM Property
Company
About
Contact
Insights
Invest Online
Login
Other
Privacy Policy
Terms & 
Conditions
​Disclaimer
Contact
Level 4, 55 Grafton Street
Bondi Junction, Sydney NSW, 2022

1300 750 007

ima@tamim.com.au

DISCLAIMER

​The information provided on this website should not be considered financial or investment advice and is general information intended only for wholesale clients ( as defined in the Corporations Act). If you are not a wholesale client, you should exit the website. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions. Where the website refers to a particular financial product, you should obtain a copy of the relevant product services guide or offer document for wholesale investors before making any decision in relation to the product. Investment returns are not guaranteed as all investments carry some risk. The value of an investment may rise or fall with the changes in the market. Past performance is no guarantee of future performance. This statement relates to any claims made regarding past performance of any Tamim (or associated companies) products. Tamim does not guarantee the accuracy of any information in this website, including information provided by third parties. Information can change without notice and Tamim will endeavour to update this website as soon as practicable after changes. Tamim Funds Management Pty Limited and CTSP Funds Management Pty Ltd trading as Tamim Asset Management and its related entities do not accept responsibility for any inaccuracy or any actions taken in reliance upon this advice. All information provided on this website is correct at the time of writing and is subject to change due to changes in legislation. Please contact Tamim if you wish to confirm the currency of any information on the website.  

magellen, kosec, clime, wilson, wam, montgomery, platinum, commsec, caledonia, pengana, tamim

  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT