Investing skills, like learning to play the piano, are developed over time. You wouldn’t expect to play a concerto the first day you sit down at the piano, so why do people expect a great performance when they place their first investment?
It’s interesting to me that people put more time into learning an instrument than they do in learning to manage their assets more effectively. The probability of positive returns is so small in music, yet we commit so much time. Contrastingly, the probability of a positive return is so great in the financial markets, yet we commit so little time. It’s an anomaly. Let me suggest three things you can do to improve your investing skills:
1. Devote Time to Developing Your Investing Skills
Investing skills requires time to develop. My daughter’s piano teacher expects a half an hour of practice everyday. The book Outliers, by Malcom Gladwell, puts forth the premise that to be an expert in your field requires a devotion to one’s craft for at least 10,000 hours. I am not sure that successful trading requires 10,000 hours, but I do know that if you do not set aside time to practice, you’ll never master the craft. The fact is simple: successful investors – professional or otherwise – set time aside to master their investing skills.
2. When Practicing Investing Skills, Keep it Real
One challenge with practicing to develop investing skills is that simulation is easy to cheat. Whether you’re trading on paper or through a demo platform, it’s easy to let things go. Going back to my little piano performer, she sometimes gets sloppy in her posture, fingering, timing and tempo. I remember her teacher telling her, “Practice does not make perfect. Perfect practice makes perfect.” Since investing is a skill, keep things as real and disciplined as possible so that your time spent is beneficial in real life environments.
3. Keep Your Eyes Open for Ways to Develop Your Investing Skills
The good Lord gave you eyes to learn. When practicing your investing skills keep your eyes open and stay observant. Watch how the market forms, how it develops. Watch how your strategies interact with the market during the repetitive iterations of your practice sessions. Skill is developed through testing, observation, adjustments and more testing, but skills development cannot occur if you don’t see the details in both the big AND small picture. My daughter’s performance on the piano can be altered dramatically depending on the position and pressure of the strike of her finger on the keyboard. Developing investing skills requires focused attention to detail and this attention to detail will pay dividends in your performance.
I know that not everyone shares my love and passion for investing, and there are returns from learning an instrument that cannot measured in monetary forms. I know that not everyone has the capacity to put the time into practicing his or her investing skills as I have. Fortunately, investing skills can yield positive returns quickly and a little practice goes a long way. Investing is a skill that has a high probability of success. Investing skills can be learned by anyone with the desire to master it.