Find An Investing Mentor Or Coach

When you listen to very successful people, one of the factors they often cite as having contributed to their success is having a mentor.

The presence of someone other than yourself in your life that has your best interest in mind can be huge. A mentor can cut your learning curve in half by showing you the right way to do something, because he’s already been there and done that.

That kind of coaching is priceless.

When I worked at Spear, Leeds and Kellogg, first as an assistant and later as a trader, my mentor was a guy named Jimmy Morris. He was an incredibly nice man, and taught me everything he knew about how to make markets in a stock. When I left Jimmy and became my own trader, I was armed with everything he taught me during our time working together.

After Spear Leeds was bought by Goldman Sachs, most of us were gone within a few years and unfortunately lost touch.

It took years for me to find another mentor, but I did – and I’ve never even met him in person.

His name is David Gardner, co-founder of The Motley Fool.

When I worked on Wall Street, I had a short-term trader’s mentality. The thought of buying something and holding on to it for years was not in my consciousness. Most of the traders that worked on the trading desk had that same mentality.

It wasn’t until I started listening to the Rule Breaker Investing podcast that I learned about compounding your money over many, many years.

In the late 90s, I sat front row for the the birth of companies that would go on to transform the world we lived in: AOL, Amazon, Google and eBay, among others. I came very close to pulling the trigger on Amazon…but I got talked out of it. What a huge mistake that was!

Buying and holding Amazon from 1997 to now would have generated incredible wealth. The only question is: would I, in fact, have held it all this time?

The answer to that question is “probably not” – and the main reason would be attributed to not having had a mentor.

You see, a mentor will help you to not make the number one mistake most investors make – which is selling too soon.

Even the great investors can make this mistake! Case in point: in 1965, Warren Buffett invested $4,000,000 in Disney after meeting with Walt Disney himself. About a year later, he sold the stock after a 50% gain. Now, turning $4,000,000 in to $6,000,000 is a fantastic return…however, if Warren had held on to his investment, he would have made 2870 times his money. His total return would have been close to $11.5 billion.

If today’s Warren could have mentored younger Warren, I’m sure he would have told him to buy and hold.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

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You Only Need One Winner!

When it comes to investing, I recommend that you own at least 15 different stocks. One reason for this is to diversify your risk.

However…it only takes one winner to set you up for the rest of your life!

There are stories about people that bought one stock that made them very wealthy over the years. I’ve mentioned quite a few myself in previous posts.

A big winner is very easy to spot in hindsight – but not so simple to identify in real time.

This is another reason why I recommend owning at least 15 companies – to increase your chances of finding that big winner.

When I say that you only need one out of fifteen to have huge success, I’m not lying! Here’s how the math works out in a real life scenario. Suppose you invest $1000 each in fifteen different stocks. Over time, they perform like this:

  • 10 lose money.
  • 3 are mediocre.
  • 1 is solid – up 100%.
  • 1 is up 100 times in value.

You could have lost all of your money in the 14 other investments – losing $14,000 – if each company went to zero. (The likelihood of that happening is slim to none. It is rare to lose 100% of your money unless you are buying penny stocks.) But your profit of $100,000 in just one winner would more than make up for that loss!

In the 1980s, a small business owner named Stewart Horejsi was running his family’s welding business when competition started to hurt it. It was difficult for welding companies to distinguish themselves in any way, so they often simply undercut each other in order to gain business.

Stewart realized that reinvesting any money into a failing business would be futile.

After reading about an investor named Warren Buffett, who ran a company called Berkshire Hathaway, Stewart was convinced of the best way to allocate capital. He invested in Warren Buffett’s company.

At the time of his first investment, Berkshire was around $280 a share. Every time Stewart got extra cash, he bought more shares.

Ultimately, Stewart invested about $50,000 in Berkshire Hathaway over many years. That investment grew to over a billion dollars.

That, my friends, is why you only need one winner.

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)