The Secret to Successful Investing: Consistency

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Warren Buffett, Dennis Gartman & Puggy Pearson

Warren Buffett, Dennis Gartman & Puggy Pearson

Warren Buffett, Dennis Gartman & Puggy Pearson

Investing can be tricky business. Even for the most well-informed and experienced investors, uncertainties and unpredictable business climates create lots of question marks. In an effort to stem some of the uncertainty, investors are continually searching for the “secret” – the investment strategy used by those who have experienced profound success. If you’ve been searching for that secret, you may be surprised to learn that it can be summed up in just one word: consistency.

Forbes magazine recently reviewed the strategies of three of the world’s most successful investors: Dennis Gartmen, Warren Buffett and Puggy Pearson.

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What’s most interesting about their strategies is not the similarities, but the differences. The three men listed their top three rules – the rules from which they never waiver when investing – and none of them were the same.

Warren Buffett on Patience

Warren Buffett emphasized patience over knowledge. He believes it’s more important to be patient than it is to know a lot of stuff. A good investor, he believes, waits out the storms – the sharp drops in value, the potential takeovers and mergers – because stock value usually rebounds, and possible mergers rarely come to fruition. He encourages people to cultivate a willingness to go against popular opinion, to gather information and make their own decisions.

Dennis Gartman on Knowledge

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In contrast, Dennis Gartman places a fair amount of emphasis on knowledge. In particular, he encourages investors to pay attention to the management styles and issues. Where there’s one management-related problem, he surmises, there are likely more. And when a problem is discovered, the investor should pull his money and move onto something else. Gartman also believes that investors should spend time evaluating both the fundamentals and the technical analysis of potential investments. If the fundamentals and technical analysis don’t agree, he says, don’t invest.

Puggy Pearson on Risk

Though the late Puggy Pearson is known more for his poker skills than his investment ability, his perspective on risk is helpful to investors. His first rule was to find “bets” (i.e. investments) that offer 60/40 odds or better, and only bet on those. How you find them doesn’t matter, all that matters is that you find them and invest in them. Once you find the right investments, Puggy believed, your next step is to determine if the odds are great or just good. Bet a lot on the “great” opportunities and less on the “good” ones. It was his best advice for taking and simultaneously minimizing risk.

As you can see, each of these successful investors sets very different rules for choosing and managing their investments. But as we mentioned at the beginning of this article, the rules themselves are secondary, while sticking to the rules consistently seems to have yielded great results for all three men.

Though it isn’t specifically mentioned by any of the investors interviewed by Forbes, there is one other thing that these men have in common. While they do remain consistent in their investment strategies, one thing they don’t do is get emotional. Each of these men make investment decisions based on facts, not feelings. The current stock market, with its unpredictability and sharp gains and losses, can play havoc with your emotions. Keep emotion out of your decision-making as much as possible. If you buy or sell a stock based on panic, fear or even excitement, it could end up costing you a lot of money.

All three of the men highlighted here conduct some type of research, though some dig deeper into a company than others do. Researching a potential investment serves two purposes:

  1. Gaining more information will help you determine if it’s really a good investment or not, and,
  2. Prevent you from making rash, emotion-based decisions.

That’s not to say intuition shouldn’t play a role in your investment choices. But intuition and emotion aren’t the same thing. If you have a gut feeling about something, you should follow it. But start by doing some investigating.

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Hearing about the investment practices of people like Warren Buffett and Dennis Gartman can give us all good ideas about how to approach our own investments. And while we may not come away with specific steps, we should all follow their over-arching example of picking one investment strategy and sticking with it. Remember: consistency is key.

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