This morning, while walking from the train after an hour-long commute, I passed a friend I hadn’t seen in a while.
We got to chatting, the usual stuff. We talked about what we do, how we’re doing, our current jobs, etc. We discussed the rather platonic things everyone talks about when they see someone they haven’t seen in quite some time.
After a 10-minute casual conversation, we dug a little deeper into each other’s lives. When he dug into my story, we ended up on my writing on Substack and investing. After saying the what, why, and how, he mentioned that 4 months ago he started investing as well. As an investor, I was thrilled to hear that someone else started working on their future through investing.
He talked me through his process, his thought process, the books he reads, and the podcasts he listens to. All to get a better grasp of investing. Honestly, it sounded and felt like I was talking to my younger self when I discovered the world of stocks. Everything he mentioned, I saw myself.
Then he mentioned something I saw myself in, but also a lot of beginner to intermediate investors.
‘‘Yorrin, you know what I’ve been struggling with, though? I feel like my poor habits are keeping me from performing optimally… I feel like this is keeping me mediocre while I’m destined to do great.’’
That used to be me.
That was me right there, exactly when I started my journey.
I told him my 6 habits that significantly transformed my investing. And instead of gatekeeping this information, I’ll be sharing exactly what I shared with my long-lost friend.
Habit #1: Be obsessed with understanding the numbers, not the narrative
I can hear your sigh from the other side of the world.
Yes, this is probably the most obvious one. But even though it’s so obvious, most investors still get dragged along by the narrative that surrounds the business. And don’t get me wrong, I’ve been in exactly that place as well.
When I bought my first couple of shares, I’m ashamed to admit that it was primarily driven by a fantastic narrative that spun around those companies. I bought into companies that had a) a wonderful story on why it would most likely 100x (honestly, I don’t know why I believed the 100x claim, but I did) and b) the ROIC was above the cost of capital for all those companies.
Back then, I had read a couple of articles, and ROIC was a recurring theme. Therefore, when I started, I bought those companies because of a wonderful story and high ROIC.
As you might see coming, a lot of those businesses didn’t work out in my favor. Out of the 5 stocks I bought, I lost money on 4. At that moment, I started looking for the reason why these companies didn’t perform the way I had expected, and I found out about fundamental analysis of companies; a whole new world opened up for me right there on the spot.
After diving deeper into what fundamentals are, how to analyze them, how to interpret these numbers, how they correlate, etc. I took another look at the companies I had once bought.
The fundamentals were awful.
Unprofitable
Revenue growth was rapidly declining
They were extending credit to customers
They were neglecting their suppliers, i.e., not paying them
Those companies were taking on significant debt in a high-interest environment
And the list goes on.
However, the stock price surged for a couple of weeks due to the narrative of the company turning GAAP profitable anytime soon now due to new drug releases (yes, I used to invest in pharma), new customers in their pipeline that would significantly boost their revenues, new investment opportunities in other countries, and promising M&A activity.
However, press releases of these companies gave no solid indication that these promises would bear any fruit. Therefore, the narrative collapsed, and I lost some capital on the way down while still holding on to these narratives.
That’s the “aha” moment for me, when I knew I had to follow the reported numbers and see the narrative as a group of unstable groupies fighting to get the best narrative out there for, most likely, their own benefit.
Habit #2: Learn as if your life depends on it; all you got is yourself
I told my friend to be open-minded and be eager to continue learning.
At some point, we humans reach a point, and we think to ourselves ‘‘Hmm. I got a good grasp of what I am looking at; I think this is enough.’’ I hate to break it to you, but it’s not enough.
I fell for this exact trap as well.
After doing close to a year of research and learning, I thought that I had mastered the art of investing. I stopped reading books, listening to podcasts, reading articles, and reading analyses posted on platforms like Seeking Alpha, etc.
However, not long after, I was confronted with this flaw when I had a conversation with some friends about the businesses we own. We were discussing metrics, approaches, mental models, and many, many more aspects of investing, and that’s when I realized I only knew the tip of the iceberg. When we were discussing mental models, I shot blanks. I was confronted with human design errors, like biases, that I had no knowledge of, but that were highly relevant to me as an investor.
It forced me to take a step back and check my attitude and knowledge.
I forced myself to escape my tunnel vision to discover that good investing isn’t just about numbers; there’s so much more that comes around the corner, sometimes even to bite you in the ass.
I knew how numbers worked, but I didn’t know how I worked.
This was a wake-up call to continue learning. I forced myself to keep an attitude of ‘‘I don’t know it all, but I would like to know as much.“ And not solely about the numbers, but about people, business, entrepreneurs, supplier networks, global dynamics, regional and international business structuring, etc.
By getting a better understanding of business, people, countries, etc. I was able to better understand what motivates people, suppliers, banks, etc. This, in turn, helps you get a better grasp of what’s happening now, why it’s happening, how this could work out, and what the potential benefits and downsides could be in any scenario that might pop up within people, businesses, etc.
You would be surprised how much nature can teach us about investing and business.
It for sure surprised me.
Habit #3: Do less, not more.
I told my friend that I was making my broker very, very rich.
I then told him that I was continually watching what the stock price was doing and basing my actions on that. Yes, I know… the ignorance here is comical.
I was spending all my time focusing on my percentage gain and seeing if I could quickly grab some more gains somewhere else, interrupting compounding every time. This, in return, caused me to have tremendous costs in all this ‘trading’ that I was doing.
After removing the costs of all these transactions, I was netting 0%…
After being confronted with this, I started letting time do its thing (this happened because I kept learning, like previously mentioned, and found out what actually drives long-term results).
I told him I started focusing on deeply understanding the business, buying it, and letting it sit and do what it should do, compounding earnings and free cash flow over time while reinvesting this back into the business at solid returns. And, most importantly, do nothing.
To distract myself, I started allocating my time to other aspects of my life to continue learning and getting 1% better every day or by the week.
Inactivity has brought peace of mind, spare time, and continued learning, my way, which has paid itself off by getting solid returns.
Habit #4: You should focus on your process, not your results
Then I told him something that took me way too long to figure out myself.
I used to check my portfolio 4, 5, and sometimes even 6 times a day, and I’m sure we’ve all been there at some point. Not because I was going to do anything with that information, but I just wanted to see the number go up. When it went down, my day was ruined. When it went up, I felt like a genius. Yes, I know… the ignorance here is comical, again.
However, I wasn’t measuring anything I could actually influence. I was measuring what thousands of strangers decided my company was worth that particular Tuesday morning, and I let that decide whether I was doing a good job or not.
He looked at me like he knew exactly what I meant, because he did.
That was me once again.
Then I told him about the trade that almost ruined me, and no, it wasn’t a loser.
Somewhere in my first two years, I bought a business on a feel-good hunch. Revenue going up and to the right, a founder who spoke really well in interviews (a little too well), and I bought into the business with no checklist and no notes. The stock went up around 60% in a couple of months, give or take, and I walked away thinking I had reinvented the wheel.
That’s the part that honestly scares me, looking back.
A loss tells you something is wrong, and a win from a bad process tells you nothing, or even worse, it tells you to keep doing the exact thing that will eventually cost you. I got paid for being lazy, so I stayed lazy. The market, however, collected on that eventually as it always does.
Sometimes you do everything right, and it still goes badly. That doesn’t mean your process was wrong. It means the world was noisy for a while. And sometimes you do everything wrong and get paid anyway.
So if you only sort your decisions into “made money” and “lost money,” you’ll learn the wrong lessons from both piles.
Your process, however, starts paying you almost immediately.
Not in money. You open an annual report, and you actually understand what you’re reading. You look at some hyped-up company, something feels off, and you can point at exactly what it is.
The returns take years. Five, ten, sometimes even longer. And that gap is exactly where most people quit, chase whatever went up 200% last quarter, and reset their clock to zero.
So don’t stare at the score.
Look at what you did this week, this month, this year. Do that enough times, for enough years, and the returns have nowhere else to come from.
Habit 5: Don’t try improving everything at once; focus on just one thing
Then I told him not to change everything at once.
That’s what I did in my second year when I decided I was going to fix my idea generation, my checklist, my valuation work, my reading habits, my journaling, etc.
I did this all in the same month, all at once, and you can pretty much guess how that went. It, of course, went horribly.
Three weeks later, I was back to doing none of it, feeling more demotivated than I have ever felt before.
So just pick one thing for the rest of this year, just one, and go extremely deep on that one thing you choose.
Maybe you looked at yourself and realized your idea generation is weak, or maybe you keep buying businesses without ever really judging the people running them. Maybe you never even write anything down, and you can’t seem to remember why you bought half your portfolio.
Whatever it is, don’t tell yourself you’re going to become a great investor across the board this year.
That’s wishful thinking, not a plan.
Instead, take that one weak spot and build something realistic around it. Give it a schedule. Give it a place in your week. Make it small enough that you’ll still be doing it in November.
Then execute, relentlessly.
Habit #6: Raise the bar relentlessly
You can’t control the market. You can’t control what your portfolio does this month, this quarter, or this year.
What you can control is your standard.
The danger is that the market pays you for sloppy work every now and then. You skip the filings, you buy on a hunch, and the stock goes up 40%. That’s the moment your standard starts slipping. You tell yourself the shortcut worked, so you take it again.
It won’t work twice.
Raise the bar instead. Read the whole report. Run the checklist on every name, including the ones you’re excited about. Write down why you bought it, on the day you bought it. Say no when you don’t understand the business well enough yet.
Your standard is the only thing here that’s fully yours. Guard it in good quarters and bad ones.
The results will follow the standard. Give them time.
What habit, that might or might not be on this list, changed your investing forever?
—Yorrin
Disclaimer
By having read this content, you acknowledge and accept the terms of the disclaimer that you can read here.
The hardest lesson to internalize early on is that stock picking isn't about batting average; it's about slugging percentage and process. Four mediocre picks that go to zero hurt, but owning one true compounder that reinvests at high ROIC for a decade covers all the early tuition. The key is making sure the early losses actually teach you what a real moat looks like.