The Best Investing Advice

buried treasure

The following tip is probably the best investing advice you can find: Do you know it is completely useless to ask someone for an investment tip?

Each time I’m at an investment conference or even an informal gathering, I tend to hear people asking: What’s the hottest share to buy now? And once someone mentions a company, everyone scrambles to note the name down.

However, such actions might be mostly fruitless for two reasons. Firstly, without a strong understanding of the company in question, an investor would hardly invest anything significant into the share. Thus, any gain from the share might be negligible in relation to the investor’s total wealth.

Secondly, because the investor would have little knowledge of the business fundamentals of the “hot tip”, he or she would not know what to do if and when strong price movements occur. If the share goes up, should I sell or hold on for more gains? If it goes down, do I cut my losses, hold on it, or buy even more? Without a clear understanding of the company in question, how can the investor make an informed investment decision?

The most important thing in investing

Investing is a process of collecting information, and then analysing and interpreting all that data to come up with the weaknesses and merits of any particular investment choice. Without someone to guide you through that process, you might find yourself speculating more than investing most of the time. That is why it is completely useless asking for a hot tip from someone without him or her to guide you through the merits and risks of that particular investment.

Famous investors such as Warren Buffett, Charles Munger, Walter Schloss, and Peter Lynch etc. have all achieved great investment results by buying a wide range of different companies (for more on this, see here). Their experiences in investing shows that having a sound investment process is much more important than knowing the hottest tip in the market.

Foolish Summary

We at The Motley Fool Singapore are also a very diverse group of investors (we’re living up to the Motley in our name!). Some of us enjoy looking at high-growth companies; some religiously stick to dividend shares; others meanwhile have a great appreciation for second-grade companies that are selling at extremely cheap prices.

Yet, all of us tend to do well as investors despite the diverse approaches. It shows that there isn’t just one way to the path of successful investing. Instead,  there are multiple ways to reach the same destination. Or as the saying goes, there are many roads that lead to Rome.

There’d be more to come from us on how to help you create a useful investment process. Stay tuned!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn't own any shares of companies mention above