This post is an excerpt from the most recent edition of The Felder Report PREMIUM:
What separates truly extraordinary investors from all the rest? It’s simple: They are extraordinarily discriminating.
I talk to a lot of investors. Every one of them is looking for that next, great trade. They’re researching, studying charts, reading annual reports and analyzing financial statements, whatever their process calls for, and they should be scouring the markets like this. You can’t expect to reap the rewards of any activity without first sowing the seeds in this way.
The one distinction, however, I notice between average traders and investors (and I’ll use them interchangeably here though they use very different methodologies) and really good ones is average traders put on far more trades than the really good ones do. I’m talking ten times as many trades, at least. Average traders put on trades all the time. They believe they really are capable of finding that many good ideas on a regular basis.
“Charlie and I decided long ago that in an investment lifetime it’s just too hard to make hundreds of smart decisions…. Therefore, we adopted a strategy that required our being smart – and not too smart at that – only a very few times. Indeed, we’ll now settle for one good idea a year.” -Warren Buffett, 1993 Berkshire Hathaway Letter to Shareholders
Really good traders, in stark contrast to all the others, are far more patient. They don’t put on a trade simply because they have an opinion about something or worse, someone they respect has an opinion about it. No. They wait for the perfect setup – the setup that they have profitably taken advantage of time and time again. Until it arrives, they do nothing.
“One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do…. I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime…. I wait for a situation that is like the proverbial, ‘shooting fish in a barrel.’” -Jim Rogers, Market Wizards
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