Lessons to learn from top investors failures
Remember when Eleanor Roosevelt said “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”? Every investor makes mistakes and some huge mistakes at that. The idea is to make mistakes, learn from them and strive towards being a better investor, by each passing day. As they say, nobody is born perfect, let’s look at some of the best investors and the lessons that they learned, the hard way.
Everyone knows him, right? But did you know in 2016 Buffett bought an 11% stake in Delta, 10% of American and Southwest Airlines, and 9% of United Airlines, but the investment backfired and in 2020, he sold the stocks at a loss, saying ‘’“The world has changed for the airlines. The future is much less clear to me.” This resulted in a US$49.7 billion quarterly loss for Berkshire Hathaway.
- Sometimes it is necessary to accept that you made a mistake and try to cut your losses.
- When evaluating a company, look at the quality of the company and only after you have confidence in the quality of the company should the price be evaluated.
Benjamin Graham, better known as “the father of value investing” was Warren Buffet’s mentor. Graham believes that patience is an important aspect in the investing world. “The intelligent investor is a realist who sells to optimists and buys from pessimists.” – Benjamin Graham.
Graham believes that an investor should be patient when the market is greedy, and should be greedy when the market is fearful. In a simple strategy, he becomes the seller when the market is greedy and the buyer when the market is fearful.
Carl Icahn is a private equity investor and a corporate raider. Starting 2004, Icahn invested US$191 million in Blockbuster, the world’s biggest video rental company at that time. Icahn used his position on the board to push for expense cuts, the board forced the then CEO out, and the new CEO reversed the changes, and customers abandoned Blockbuster in droves. In March 2010, Icahn sold his Blockbuster shares at an average price of US$0.26 per share, losing 98%.
The most important lesson investors need to learn from Icahn’s fisco is that they should be aware of the loss version. Trusting the senior management is very necessary, and even as a member of board, it is important to trust their strategy and decision.
Dennis Gartmann is the publisher of ‘’Gartman letter’’, daily commentary of daily markets. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are ‘right’ only 30% of the time, as long as our losses are small and our profits are large.” —Dennis Gartman
- Wait for winning trades, don’t sell at first signs of profits
- Investors should be fine with losing a bit of money, but they shouldn’t be okay with letting winning trade go by and lose a lot of money.
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