There are few investors in Australia with a better performance or reputation than Kerr Neilson from Platinum Asset Management Limited (ASX: PTM), which is a fund manager with a focus on Asia.
Mark Draper, an advisor with GEM Capital, wrote an article for the AFR stating seven tips from Mr Neilson to be better investors:
Think about how the world is likely to be
He said that investors need to think about what the world will look like in the future, not what it is today. The world is changing and the way to generate strong returns is to identify which businesses will be a lot more profitable in the future.
Telstra Corporation Ltd’s (ASX: TLS) current problems have been coming for a long time.
It is the competitor’s response that matters most
It’s important to fully understand the businesses you are researching, but competitors are also important. A company may have an edge at the moment, but how competitors can react, or not, is a hugely important consideration. A competitor could erode profit margins over time, such as Amazon.
Learn to deal with media overload
The 24-hour news cycle can throw up a lot of smoke and mirrors about issues that are likely not important. If you think about how many issues from five years ago are still issues, you’ll see that many of them were short-term talking points and not worth worrying about.
Anchor decisions on fact, not momentum
Just because something goes up doesn’t mean it’s necessarily going to keep going up. Is a share price’s growth based on growing earnings, or is it purely investors getting too excited like people were with Bitcoin?
Be aware of limitations of financial modelling
It’s easy to look at winners in hindsight, the hard part is finding winners before they are priced to perfection. It’s better to be roughly right than precisely wrong, as the saying goes. He also said that new technology could provide more sophisticated analysis of numbers and trends in the future, so it’s even more important to find our edge. Just having patience and holding for long-term can be an edge.
Great investors continually build their knowledge
It’s important to always be a student and continually learn about subjects. For example, a good idea is to look at the websites of companies you’re interested in and read/listen to the investor calls. The Q&A segment can provide additional insights.
Everyone makes mistakes, so an important part to improving as an investor is to learn from your mistakes and how to reduce the chance of future mistakes. If you’re aware of your weaknesses then you can hopefully avoid future investment mistakes.
These are all great tips and I think it’s well worth learning all the lessons that the great investors are willing to teach. If you can take a lifetime’s worth of experience from a winner and incorporate that into your investing process at an early stage you could improve your performance earlier in your investing life.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Platinum Investment Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.