Experienced investors gradually realise that successful investing is not about winning, it’s about not losing. By avoiding mistakes and accepting the returns that the capital markets provide you will give yourself a huge advantage.

Successful investing is about developing a process to improve your chances of a good investment experience and avoiding poor investment experiences by controlling the things you can control risk, costs and asset allocation (as you will learn in chapter 7 of The 7 Secrets of Money). 

Think of investing as a game of tennis!

In Charlie Ellis book – Winning the Losers Game he describes how Dr Simon Ramo, a Physicist, Engineer and Business Leader (sometimes known as the father of the Intercontinental Ballistics Missile) studied the game of tennis for many years. He observed that tennis is essentially played by 2 types of players, Professionals and the rest of us.  Both play using the same rules, clothing and equipment but they play 2 very different games:

  • In professional tennis the result is determined by the actions of the winner who will beat the opponent by placing more precision shots just out of reach or forcing more faults from their opponent.
  • The amateur game is decided largely upon the actions of the loser since precision shots and long rallies are rare and points are normally lost by driving the ball into the net, hitting it out or double faulting.  Instead of trying precision shots or faster serves, normally beyond their ability, in an attempt to become the winner the more reliable approach is simply to concentrate on getting the ball back and leave it to the opponent to make the mistakes in their attempt to become the winner.  Of course they will hit a few winners and may even look as though they might win (which will make you doubt your strategy) but as they get more confident they will make more mistakes and you will win in the long term.

Successful investing is like being that pragmatic disciplined tennis player that just keeps dinking the ball back time after time, year after year waiting for other people to make the mistakes to improve your chances of success.  Not the most exciting way to invest but investing is ultimately about achieving peace of mind that you can achieve your life goals; it should not be the source of excitement.  If you need excitement go to a casino with some money you can afford to lose not the money that your future relies on.

Remember that beating the market involves outsmarting on a consistent basis millions of participants, most of whom have far more time and resources than you and can play in different parts of the world while you are asleep.