A common denominator that shows success guidelines of good investors is that they focus on fewer concepts and less data rather than more.

Warren Buffett Success Guidelines

For example Warren Buffett, one of the world’s great investors, says his core success guidelines are:

1. Do what you like.

2. Money isn’t everything.

3. Work only with people you like.

4. Buy businesses, not stocks.

5. Invest only in what you understand.

6. Don’t over diversify.

7. Keep looking for new opportunities.

8. Buy businesses you plan to keep for life.

9. Look for businesses that are available at a good price.

success guidelines

Picture and details on Warren Buffett’s book.

John Templeton Success Guidelines

I recall watching an interview between Buffett and John Templeton. They argued over whether to invest internationally or not. Buffett said there is plenty of opportunity right here in the U.S. John said there is even more opportunity if you choose the world. I pondered this for many years and finally realized both were right. Each had their own unique system of filtering the bad from the good each system worked.

Success Guidelines Shown in Blink

Last message looked at how the book “Blink” has focused on this ability to spot patterns and behavior based on very narrow slices of experience and calls it Thin Slicing. This is what great investors do.

Michael Keppler Success Guidelines

Take for example global equity analyst Michael Keppler. He rates equity markets based on value. His experience in this field allows him to decide whether a market is a buy, sell or neutral candidate based on just a very few factors, mainly p/e ratios, price to cash flow and dividend yields relative to that market’s history. There is a bit more to Keppler’s system, but not a lot.

Michael has spoken at a number of our courses and it is fascinating to see him field questions, because he has such absolute focus on value. If there are questions about politics, he’ll say something like, the market reflects the politics in its value. If asked about the strength of the underlying currency, he’ll say something like the market reflects the currency position in its value. If asked about support and resistance levels or current moving averages, he’ll say something like, the market reflects all these things in its value.

Value is his focus and this allows him to make accurate decisions in the shortest time from a minimal amount of fact. He is able to filter out the news, the weather, the politics, the currency, the economies, the wars, the terrorism and all the noise that can confuse, waste time and mislead.

Success Guidelines Results

The proof of the pudding is in the eating. Since 1993 Keppler’s Major Market High Value Strategy has risen 211.8% compared to a 137.1% rise in the bellweather Morgan Stanley Capital Index. In addition his standard deviation (4.5%) is also lower than the MSCI (4.8).

You can see more about Keppler and his strategies.

success guidelines

More details on the success guidelines of Keppler Asset Management

When looking at your investment decision system, instead of figuring out how to process more information, perhaps it makes sense to look at ways to calculate with less!

Where do you start weeding data out?  Look first for things, knowledge and experience that you know and believe in. This is the keeper information. Use the “as above so below” theory to apply your core beliefs to a broad range of circumstances. Take Buffet’s “work only with people you like” suggestion as an example. If you know you can’t work with people you don’t respect, you can weed out many potential investments right away. If this is a maxim, in one short stroke you can eliminate many deals without worrying about their profit potential, their honesty, their economic and social good, their market position, their moving averages, their cash flow and so forth.

Cut out data that you know little of. You won’t have much confidence in this aspect of your decision anyway so why waste time considering it? Ignore details that are short term and that can change at a moments notice.

When it comes to thinking it appears that less really is more. Yet just keeping information out of the system is not the only factor that increases our ability to make fast, accurate decisions.   If Blink is to be believed, a lot of our most accurate thoughts takes place in ways we cannot even know.

The next part of this series looks at an entirely different way to process information.

Success Guidelines for Wealth