In investing, many people consider mathematical calculations, computer programming, and high intelligence as essential components of success. However, the reality is different. If you truly want to succeed in investing, you need to recognize that knowledge alone is not enough. Rather, your **actions** are the key to financial success. Today, drawing on the insights of Morgan Housel, known for his work “The Psychology of Money,” we will explore why actions are more important than knowledge.
Right Actions are the Key to Investment Success
In investing, it is not just about **what you know**. **How you behave** is far more important. For example, consider a doctor who has extensive knowledge of health. While they may possess all the biological knowledge, if they maintain unhealthy lifestyle habits, their knowledge is meaningless. The same applies to investing. Even if you have all the knowledge and data about the market, if your actions are driven by greed and fear, that knowledge becomes useless.
Understanding the Importance of Actions: A Case Study
Even a Harvard-educated doctor would struggle to maintain health if they smoke and eat irregularly. Similarly, in investing, without the right actions, mathematical skills or financial information are of no use. Housel states, “Finance is one of the fields where people who are not highly educated or financially sophisticated can do very well over time if they just behave correctly.” This emphasizes the point that actions are more important than knowledge.
The Problem of Information Overload
Today’s investors have access to a vast amount of information. Stock prices can be checked in real-time, and various analyses and predictions are readily available. However, this information overload can actually hinder long-term performance. While people don’t check the value of their homes every morning, they tend to monitor their stocks or investments too frequently. This excessive focus can sometimes lower investment returns. To achieve long-term success, it’s essential to avoid over-reliance on too much information and to maintain a balanced perspective from a certain distance.
The Relationship Between Luck and Success
Luck plays a significant role in investing. Factors beyond your control can have a major impact on your outcomes. When external events influence the results more than intentional actions, this is referred to as “luck.” For instance, an economic event like a sudden drop in interest rates is hard to predict but can significantly impact investment results. Therefore, it is crucial not to ignore the influence of luck and to maintain flexibility to adapt to changing circumstances.
Secrets to Successful Investing
To succeed in investing, understanding volatility is crucial. Volatility is an unavoidable phenomenon and a cost that investors must bear. It’s important to see it as a tuition fee and to accept volatility from a long-term perspective. Additionally, maintaining a balance between optimism and pessimism is necessary for successful investing. You must be able to endure economic uncertainty and patiently work towards long-term gains.
Conclusion: Actions Matter More Than Knowledge
Ultimately, to succeed in investing, **how you behave** is far more important than **what you know**. If you aim to achieve financial goals through the right actions, you need to develop the ability to control your behavior rather than just accumulating knowledge. This will help you grow your portfolio in the long term and lead to financial success.
From now on, trust in the **power of actions** and move towards financial success by making the right choices. While accumulating knowledge is important, only by translating that knowledge into right actions can you achieve true results. I hope this article provides a small help in your investment journey.
Reference: Barry Ritholtz, “At The Money: Behavior Beats Intelligence”