The Education of a Value Investor

The Education of a Value Investor

I randomly picked up this book at a library in Melbourne. Ah, the beautiful things you discover when you’re not even looking!

Despite the title, this book isn’t so much about the technical detail of investing strategies. Rather, it talks a lot about the mindset that’s required to be a good investor, which also applies to many other aspects of life.

The author, Guy Spier, was an investment banker at some dubious firm on Wall Street before he left and started his own fund. He began to read up on Warren Buffett and decided to mirror his strategies not only for investing but for how he lives his life. 

I’d been meaning to get on to Buffett for a while, and this book was a fantastic introduction. I would definitely recommend giving it a read — it’s super easy to read and pretty damn entertaining. 😆

My key takeaways:

Mindset is key.

It is super important to master your mind because it can be bloody irrational at times! This is really important in investing, where your emotions can easily get the better of you, but it’s totally applicable to other areas of your life.

One thing that Guy does to ensure that he makes good investing decisions is having a checklist. He developed his list from past experiences, with about 70 items of things he considers before buying shares.

He got the idea from surgeons who’d used a checklist to prevent patient deaths. It’s just a way of making it easy to avoid obvious and predictable errors. He thinks it’s important to create a list that is catered to you because we all mess up in our own little ways.

One way in which I can see this working for me is when I’m deciding which opportunities to pursue. I’m guilty of saying yes to a lot of things, and I’m always getting distracted by shiny and new stuff. This leads to a big fat lack of focus which can be really detrimental as I try to do too many things at once. 😩

My version of a checklist would be Derek Sivers’ “hell yeah or no” test:

When deciding whether to do something, if you feel anything less than “Wow! That would be amazing! Absolutely! Hell yeah!” — then say “no.”

– Derek Sivers

Buffett guards his mind very carefully by keeping his mobile phone switched off and not having an email address. He also doesn’t have distracting meetings, so that he has the time to think in peace.

I’ve gotten into the practice of getting rid of email notifications and putting my phone on ‘do not disturb’ all day. If I need to check for messages, I’ll do it when I feel like it.

People are often worried that they’ll miss out on something, but honestly, it’s usually not the end of the world if you reply a little late.

It’s been so good for enabling me to focus on things that are important and not getting my mind going into overdrive thinking about all the notifications I have to respond to.

Don’t take whatever you learn as gospel just because it came from a somewhat credible source (e.g. university) – be open to new ideas.

Guy had written off Warren Buffett’s investing strategies for ages because his university education had told him that it didn’t make sense.

HA, this is so relevant to my experience with becoming disillusioned with my uni studies. Don’t get me wrong. I’m grateful for the opportunity to learn stuff that is likely to be quite useful in life (accounting and law), but uni is definitely not the be-all and end-all.

I’ve learned so much more through life experiences — where I can see things happen in reality and not just theoretically.

In the past, whenever I heard things that I thought I knew pretty well already, I’d just start tuning out and going “I already know this…”

But I realised that there’s always something to learn, even if it’s just reinforcing what you already know. Now, I just absorb everything and reflect on it later. 

According to Guy, part of what makes Buffett so successful is that he’s never stopped looking to improve himself and he continues to be a learning machine.

I believe that learning is a lifelong process and the moment you close yourself off to learning, you stop growing. 

Our environment is often much stronger than our intellect.

Even though you might know something intellectually, pressures around you might make you act differently.

For example, Guy had read all about Buffett’s fee structure that aligned his interests with his shareholders’ interests, ensuring that he’d only get paid if they did well. He thought it was pretty sweet.

However, all his advisors pressured him into doing it the normal Wall Street way where managers get rewarded even if they do a crap job. Despite knowing that Buffett’s structure was probably a better option, he caved in.

He eventually turned around and implemented the strategy, but it took a whole process of changing himself internally for that to happen.

Later on, he even moved to Zurich in order to get away from the noise of Wall Street. He was inspired by people like Buffett who locate their offices far away from financial districts.  

It’s hard to go against the crowd. It’s soooo easy to justify doing something just because everyone else is (e.g. spend a crapload of time getting some expensive pieces of paper to get a secure job).

Hence it’s really important to know who you are, what’s important to you and how you want to live.

You won’t know this unless you spend a solid amount of time thinking about it – i.e. stop going with the flow, sit your ass down and figure out what you believe is right for you.

I can’t stress how important gaining a sense of self-awareness was for me. It’s led to my life turning upside down for the better and it’s amazing. 🤩

And for anyone who is interested, here are his investing tips:

  1. Stop checking the stock price. Especially when you’re investing for the long term. It’ll trigger your irrational brain to make you wanna take action. 
  2. If someone has a self-interest in getting you to buy stuff, don’t buy it. 
  3. Don’t talk to senior management. They’re often highly skilled salespeople and it’s their job to make you feel optimistic about the company’s prospects. 
  4. Gather investment research in the right order. From most objective and least biased sources like annual reports to less objective stuff like press releases. 
  5. Only discuss your investment ideas with people who you trust, who you don’t have a business relationship with, keep it confidential and don’t have either person tell the other what to do. In fact, it’s better if neither knows whether the other is even thinking of buying/selling the stock. 
  6. Never buy or sell stocks when the market is open. If you do it once prices have stopped moving, you can detach yourself from the emotional side of investing.
  7. If a stock tumbles after you buy it, don’t sell it for 2 years. This is just a rule to make you slow the hell down when you decide to invest because you gotta ensure that you can live with your mistakes for at least 2 years. 
  8. Don’t talk about your current investments. Because once you’ve made a public statement, it’s difficult to back away from it psychologically. 

I love learning so much good stuff from books. Imma build a huge-ass library one day. Would love to know if y’all have any book recommendations! 😉

Cover image from Unsplash

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