The Motley Fool

Absorbing Investment Best Practices From Around Us

Investing is a continuous learning journey, and there is so much that we don’t know, even if we read extensively and diligently on a daily basis. I am learning to modify and improve on my own investment techniques in order to ensure better overall performance and a lower probability of losing money. A great source of knowledge are my friends and peers who surround me.

I have been patiently searching for a fellow value investor with the same mindset and philosophy as me so that we might bounce ideas off each other. While the goal is noble, the reality is that many of us may not even come close to finding a bosom buddy who shares a similar philosophy. Instead, investors may wish to look for friends or peers who exhibit certain qualities or strengths in investing, and learn from them instead.

Here are some best practices an investor might be able to acquire from rubbing shoulders with a few quality confidants.

Company analysis and due diligence skills

Investors should try to learn from someone they recognise as having superior skills in corporate analysis and due diligence. Ideally, that person should have valuable insights into how companies and industries function and be able to articulate his or her philosophy and process well. Someone who can clearly communicate their methods and sources of information makes it easier for us to absorb the knowledge.

Some investors also have a knack for spotting red flags, leading them to avoid companies that may turn out to be duds. If we can learn how such people go about spotting these signals, we can apply such insights to our own investment process — and hopefully improve our own instincts.

Portfolio management skills

It is tough to find a person with good portfolio management skills, but it’s an underrated skill that many investors should work on. Aside from ensuring you buy the right companies, you should also be aware of how to manage your portfolio in order to maximise your returns and minimise risks.

Veteran investors have honed these techniques through a mixture of trial and error as well as experience, which proves invaluable to the aspiring value investor. These techniques may be taught in books, but a person would be able to explain it much better — and would also be able to utilise his own portfolio to demonstrate his accumulated wisdom.

Risk-mitigation techniques

Finally, it would pay to brush up on your risk-mitigation techniques. You may have some investing friends who understand the importance of accounting for various risks, and who also have the knowledge and wisdom to protect themselves from severe losses. As this is more of an art than a science (as risk itself cannot be properly defined or quantified), investors who can manage risk well are a definite rarity. Still, you may have some peers or friends who handle adversity and stressful conditions better than others, and these are the people to learn from when it comes to understanding how risks are mitigated.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.