You cannot discuss Wall Street or the stock market and then choose to ignore Michael Steinhardt’s investing principles and warnings that he shared from his experiences and learnings. Venerated as one of the most successful fund managers of his generation, Michael Steinhardt’s illustrious career reached dizzying heights with the forming of the Steinhardt Partners LP, a much-acclaimed hedge fund after having worked as a research associate, staff writer and securities analyst in the financial industry. His investing lessons are valid even in today’s times as investors wade their way through the regular crests and troughs. Some of them include:
Be prepared to err early in life
You cannot afford to make mistakes all your life. Steinhardt believed that one must not shy from making mistakes early in life and learning from them. Early age mistakes secure people from repeating the mistake later in life. This is because most early investors make the blunder of relying on their agents, brokers and analysts too blindly without evaluating the stocks or investments they are recommended. This mostly leads to losses while the profits earned are lost in paying transaction fees.
Enjoy what you are doing
Persistence is the key. Leaving your work halfway will not yield the desired results, which is why you must enjoy your work every moment. Be honest with yourself. Know what you are getting into and then enter full-fledged into it instead of adopting a half-hearted approach.’
Take the right decisions
You will never have access to all the information always nor will have the data revealing every minute detail you need to invest your money. Learn to harness the information from incomplete data to make investment decisions. More than the information that you have at hand, what matters is the decisions you make with incomplete information. The idea is to make good decisions always unbiased of your investment decision.
Trust your intuition always
Your mind processes information and experiences, which means that your gut feeling is more than just a mere hunch. It is an idea formed in your mind based not on presumptions alone but on learnings gained to date. He suggested to investors how their trading experiences could help develop their intuition faculties so that major pitfalls could be avoided.
Invest more money
You cannot afford to invest your money all your life to earn from it. Considering that you have limited time and energy to park your money, it makes sense to take more risks to gain higher returns. The risk component must be high to earn more profits, and thereby, justify your idea of investing in a particular stock or fund. Since you are putting your money at risk, you must make sure that the reward is high enough to justify the time and effort put into making that investment decision.
Adopt a contrarian strategy
Do not follow the herd. Be greedy when others are fearful and uncomfortable. Adopt a value-based, contrarian approach to investing. Most investors fall out on sticking to their decisions for fear of loss or their inability to withstand the pain. It may be difficult to go against conventional wisdom or the pack mentality, but variance with the consensus is what will get you in the long run.