Asking the right investing questions can set you up for life

This article was originally published in the June issue of One Bar Ahead™, but I wanted to spread the word and decided to post an adapted version. Please get in touch with me if you’d like the full digital magazine.

I’m writing today because a number of you have asked for my perspective on what it takes to be a successful younger investor in today’s world. What an honor — I will do my very best!

I believe success starts by asking the right questions and making conscious, thoughtful decisions based on the answers you receive.

This is something I happen to know a little bit about.

I started fencing at the age of 9, placed top 8 in my first US national tournament at 12, and was invited to join the Japanese National Fencing team at 15. I left home at 16 to compete on the International World Cup circuit as a fully sponsored professional athlete.

By the time I was 21, I’d visited ~25 countries and was fortunate enough to enjoy great results in a number of World Cup and Grand Prix events … all before many of my friends had finished high school and college.

I still have no idea how I did it, but I also managed to finish high school a year and a half early plus graduate from Gakushuin University in Tokyo which I attended simultaneously between competitions! Dad often jokes that I got mom’s brains and I think he’s right much to his chagrin!

I began investing and trading seriously during my freshman year, much as Dad did. I learned very quickly that I could struggle, or I could simply make better goal-oriented choices. The former is what most people do but the latter is what every successful athlete does.

Investing is much the same. Most people struggle because they fly by the seat of their pants. They try to do what everybody else is doing, when the better and more profitable course of action is to understand what really works for yourself and then rigorously practice that.

Victory goes to the prepared, in both fencing and investing.

You’ve got to decide what your goals are before you start into the markets. Otherwise, you’re going to get separated from your money by bigger more sophisticated, better capitalized traders.

Everything starts with the right perspective. I used to get really upset by daily volatility, for example, but now treat it as an opportunity because I understand the bigger picture and the profits being created. I can look beyond the daily noise if that makes sense.

The right perspective is a framework for success which is why it’s important to think about it that way. Doing so helps you capture big winners when the markets are going your way and minimize losses when they’re not.

Keeping things super simple helps, too. Contrary to what a lot of folks believe, it doesn’t matter very much what app you’re using, how much money you’re putting in, or how often you trade or invest. Find what works, understand why … then do it as often as you can.

Growing your money becomes relatively easy if you can focus on the future.

What’s a hot stock right now?

I get asked this a lot as you might imagine, and my answer is almost always the same.

That’s the wrong question.

Asking what is a “hot” stock right now and buying it is exactly like jumping off a bridge just because everyone else is doing the same thing. Chances are that you won’t like the landing.

The far more profitable question and the one you want to ask is “what’s still going to be around in 50 years and which companies are going to make what we need between now and then?” That’s followed by “how much money is going to be spent making it happen and by whom?”

My thesis is very simple — everything comes down to information and specifically to Digitalization. Not coincidentally, you hear Dad talk about that often because there are trillions of dollars on the line.

Advances in genetics and health revolve around learning how to read human data. Apple’s ecosystem is about the distribution and interaction with data. Tesla is about using information to optimize human transportation and rewiring the electric grid, not just cars. Microsoft Office products are about aggregating and packaging information to be as efficient as possible. Palantir is the glue that holds complex systems together in a unified form.

See where I’m going?

Find something that you know to be absolutely true no matter what, and the rest of it will fall into place.

“Hot stocks” come and go but profits are forever.

How concentrated should my portfolio be?

This is another question I get quite often and it’s totally understandable.

Wall Street preaches the virtues of diversification but that’s really a cop-out. I’m not aware of a single building named after a diversifier but stories abound when it comes to people who have made very concentrated bets and who’ve become fabulously wealthy because they did.

When you’re starting out, you usually don’t have millions of dollars to use.

I don’t either… yet.

For me, this question really comes down to how comfortable you are with your money and the perspective I’ve just mentioned. Stanley Druckenmiller, who famously “broke the bank of England” with George Soros notes that if you have a trade idea that’s really good, there’s absolutely nothing wrong with making hyper-concentrated bets.

My research, which builds upon my Dad’s, favors owning concentrated names over buying a big-name fund any day simply because of the asymmetric upside offered. That’s, in fact, where the the bulk of our recommendations come from … we know those companies are going to do a lot better over the next 50 years than crappy stocks that are often bundled into funds or the indices.

It really does make sense to own the best and avoid the rest.

Where do I learn?

One of the wonders of the Internet is that it’s easy to find information. But like many things these days, it’s a double-edged sword.

The ratio of good, usable information to bad, scammy information is about 1 to 4 in my experience. A simple gut-check can help you sort out which is which. Odds are good that if something is “free” it’s that way for a reason because the old adage you get what you pay for is very true.

The other thing to look for when you’re trying to sort out what’s what and who’s who is knowledge. A real expert like Dr. Mark Mobius or the legendary Jim Rogers will share knowledge and explain the rationale behind their decisions with decades facts and experience — not just stock picks.

My Dad’s a great example in that regard. People have followed his work for decades in some cases and that doesn’t exactly happen by accident. Millions of readers, subscribers and viewers trust him because he places a priority on teaching people the why and how in addition to the what.

Profits inevitably follow.

How quickly will I see returns?

Ah… the infamous “how quickly will I get rich” question.

The problem is that most people get interested in investing because they think it’s a great way to get rich quick, when that couldn’t be further from the truth.

So-called meme stocks are a great example. Millions of people have piled in and quite a few have made decent money. What you’re not hearing about is how many have gotten blown out.

Companies take time to grow, and by proxy, your account will too. I think it’s wise to learn how to do things the right way because doing so will give you the knowledge and financial strength to outlive short-term market noise.

There are no shortcuts except through knowledge.

The other thing to think about is consistency rather than outright returns in the beginning. One of the most important lessons I learned from Dad was to focus on making a small amount of money consistently. Then, scale up.

When you can do that well, then time is your friend. The big profits you once dreamt about when you first started out about will become reality over time as your knowledge, understanding and skills increase.

Closing thoughts

The road to investing success is absolutely within our reach. It doesn’t matter whether you have a little money or a lot, whether you’re starting out or completing a journey many years in the making.

I don’t buy off on the sentiment that beginning investors have no clue any more than I doubted my ability to hold my own against Olympic and World Cup fencers double my age with multiple medals to their credit.

I’m on the road with you and we WILL succeed!

Thanks for reading along.

PS: If you’d like to know more about starting out or investing from a younger perspective, please let me know. Or, if you’d like to learn more about the financial publication I launched with my dad, please click here.