8 tips from Guy Spier to become a successful value investor

,ETMarkets.com|

Dec 23, 2023, 02:15:15 PM IST

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Secret Mantra

Zurich-based value investor Guy Spier says the secret of becoming a successful value investor lies in leading an ethically sound life by making morally correct investment decisions, which in turn would bring financial success.

Spier says if investors can surround themselves with people with a positive attitude and work on becoming self-aware, they inevitably become not just better investors but also better human beings.

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Insights to achieve success

Spier offers certain valuable insights that can help one achieve success in investing.

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Beware of this dangerous weakness

Spier warns investors not to make the mistake he made during his early days, which was being driven by what Warren Buffett calls ‘the outer scorecard’ —the need for public approval and recognition. This, Spier feels, is a dangerous weakness for an investor to have and this can so easily lead one in the wrong direction since the crowd is generally governed by irrational fear and greed rather than by calm analysis.

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Be cautious of elite education

Spier says elite education can sometimes be a big obstacle in dealing with problems of the real world. This kind of education teaches skills that simply cannot be applied to the real world, as theories and economic models created are based on the assumption that there will be perfect information available, which isn't the case in reality.

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Tilt the playing field

Spier emphasizes the importance of doing things that can ‘tilt the playing field’ to an investor's advantage. He says by doing so investors can drive themselves towards success rather than try to fixate on some goal that may or may not be attainable.

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Creating the right environment

Spier is of the view that a healthy environment and network can have a massive influence on investors so they should choose the city where they would like to live and work, and the people they associate with wisely. Developing daily routines in a healthy workplace can keep investors focused and enable them to make consistently sound financial decisions.

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Know your limitations

Spier says it is essential for investors to know their limitations, which can come from the understanding of self, as well as by accepting the short-comings of the human mind. Only then can investors think of a process to work around these flaws.
This, he says, can be done by creating the right rational environment and developing an investment process using checklists which can help in avoiding classic mental mistakes.

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Stay clear of unethical practices

Spier says many investors get into unethical practices under pressure of falling behind their peers and end up making the mistake of compromising their own standards.

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Financial crisis is an opportunity to make money

Spier feels a financial crisis is unpredictable and can hit anytime causing investors to press the panic button. But during these tough times, it is important for investors to keep calm. He advises investors to plan promising investments for the future as there’s always great opportunity to make money during a financial crisis.

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The ultimate prize

Finally, Spier emphasizes that if investors can become self-aware, strip away facades and listen to their inner self, they can become stronger internally and get better equipped to deal with adversities when they inevitably come.

(Disclaimer: This article is based on Guy Spier's book "The Education of a Value Investor" and his presentation at Talks @ Google, whose video is available on YouTube).

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