Soro’s investment principles sage advice in this time of crisis
March 17, 2020
Note: This is the first in a series sharing sage advise from global Investment Wizards. Your comments and suggestions would be greatly appreciated. Mr. Soros is known as one of the greatest hedge fund investors and philantropists。
Soros has often been cited for his 7 investment principles. Here’s I summarize the 6 that are relevant in this age of pandemic and global recession.
In nutshell, like you, we are all scared of today’s craziness. That said, Soros says we should see this as potentially a massive opportunity to profit. I am following his advise to preserve capital (#3), do the research, be patient but be brave (#4) when time comes, to take advantage of the chaotic markets (#6).
In earlier posts, I’ve shared what we are doing such as Canadian lending; in future posts, we will share other assets we see as good to exploit and execute on Soro’s principles.
Here are the six relevant principles, worth to keep in mind in all markets, but especially turbulent ones like now:
1。 Financial markets are highly dependent upon the human beings who buy and sell them. “The best opportunities are had by detaching from emotions. Investors should simply focus on market prices and value of underlying assets.”
2. The first priority: preserve capital. Surviving requires some elements of risk; it’s the smart risks that make the difference. Invest in only what you understand and that which meets your criteria. Take risks when you feel you have a better and different perspective. Soros doesn’t always play. He has money on the sidelines and wait for an opportunity. Then he pounces.
3. Diversification is not what you think it is. Don’t put all eggs in one basket, but don’t be overly diversified where big ideas don’t make meaningful impacts. Instead, focus on a handful of strong companies that have the capacity to produce huge profits, thus offsetting losses from other investments. It’s much easier to identify one superstar than 100. Soros focuses his energy far more intensely on identifying the right investments. He spends his time identifying high probability stocks that meets his criteria. When he finds one, he knows the risks of losing money are low. When he buys — he buys big!
4. Fortune favors the brave. Luck is not the operative term for investing. Courage is, especially when odds are very much in your favor.
5. Keep quiet about your investments, what others think is meaningless.
6. Take advantage of chaotic markets. Markets are chaotic and investors often act out of highly emotional reactions rather than coolly logical calculations.