Way back in primary school is when I first came upon the phrase, ‘Common sense is not common in people.’ Admittedly, it sounds a little trite any time it’s thrown down in a conversation between grown-ups, but, make no mistake, there does exist an undeniable grain of truth in it. It is this grain of truth that Ben Carlson’s book ‘A Wealth of Common Sense’ put me in mind while I was making my way through it.
Put simply, Carlson’s book contains several bushels of wisdom that are well known but often forgotten. Here are five of the many I encountered that I’d encourage investors to regularly un-forget.
The first vital thing to brand into your mind is the subhead of the book: ‘Why simplicity triumphs complexity in any investment plan’.
Carlson writes, ‘Conventional gives you a much better return than exotic. A long-term process is more important than short-term outcomes. And perspective goes much further than tactics.’
A most misunderstood part of investing is that while financial markets are “complex, emergent, adaptive systems,” to create wealth, you need to keep things simple and, indeed, stay away from complex strategies.
For more than 100 years, ever since the stock markets started getting more organised, successful experts have pointed out the merits of simplicity. There must be something to it. And yet, people keep discarding this timeless truth.
The second thing to learn and re-learn from this book: Investing is not a competitive sport. Looking at it that way leads to knee-jerk decisions and short-termism. This is not a sustainable or desirable or healthy investment strategy.
The third, fourth, and fifth takeaways for me from this book were all about what it takes to be a successful investor. These are, in no particular order –
- Don’t look to get rich in a hurry. It’s an exception, not a rule.
- Over the long term, the markets are more consistent, but it requires a great deal of patience and discipline to remain a long-term investor when short-term instincts take over.
- Have a sound plan and, more importantly, invest in it systematically
The bottom line
Complexity is often used as a mechanism for talking investors into unnecessary purchases when all most need is a deeper understanding of conventional options. This book explains which issues you actually should pay attention to and which ones are used for an illusion of intelligence and control.
As a layperson, the aforementioned part of the book is what I found most reassuring because it helped me approach the seemingly complex world of investing more confidently, which is a quality you desperately need to remain a patient Investor, which is something you must learn to be a consistently successful investor.
Do read the book and re-read it every so often. The mantras it espouses are worth recalling now and forever.
Guest Post – Book Review by Avinash Subramaniam. Avinash is Gaining Ground well-wisher, a good Friend and Avid Reader.