Find Your Inner Warren Buffett

If you always do what youve always done, youll always get what youve always got.

Some say Mark Twain came up with this piece of pithy advice; others cite Henry Ford. No matter: whats important is that it contains a lesson for all of us with an interest in investing.

Which is this: each of us has an individual investing style. And that individual investing style predisposes each of us for success or failure.

So analysing your own investing style provides crucial clues as to what behaviours to repeat, and what to avoid.

Different strokes

I look at some successful investors, and see behaviours and approaches that seem a million miles away from my own investing style.

Are these investors wrong? No, of course not, if theyre generating returns, and those returns are consistent with their investment objectives.

So am I wrong, then? No, again, and for the same reason.

What matters is that each of us has figured out a style that works for us, and which suits our own personalities, preferences and risk profiles.

Find the edge

So a little time spent analysing your investing style can be both instructive, and profitable.

Instructive, because it provides insight into where youve done well, and where youve not done so well.

Profitable, because youll then be better positioned to do more of those things that have gone well, and fewer of those things that have not gone so well.

Youll also be a lot closer to figuring out your own investing core competence the edge, in short, that underpins your own investing style.

Because armed with that insight youll then find it an awful lot easier to identify and pursue investment opportunities that suit your style. And also an awful lot easier to identify and filter out investment opportunities that dont suit your investment style.

Which hopefully means that you wont then waste time or money pursuing them.

Blood on the streets

Let me give you an example.

If youre reading this, youll of course be well aware of Warren Buffett, whos arguably the worlds greatest investor. And the odds are also good that when asked to name Buffetts most well-known piece of investing advice, youll come up with that very familiar line about being greedy when others are fearful.

Nor is Buffett alone in suggesting this. Legendary investor Sir John Templeton spoke of buying at the time of maximum pessimism, for example. Still others have spoken of buying when theres blood on the streets.

All of which, as investment advice goes, is completely useless if it doesnt suit your investment style.

Because, simply put, its one thing to say be greedy when others are fearful, but a helluva lot more difficult to actually do it.

So if you didnt mortgage your granny and load up with stocks back in February 2009, then youre probably not constituently-suited to being a sort of fundmental value investor along the lines of say Warren Buffett, Howard Marks and Seth Klarman.

Tick the box

So what sorts of investing styles are there? Here are a few thoughts to get you started.

• The small-cap value investor, looking to uncover undervalued nuggets among smaller companies.
• The income investor, seeking companies offering decent and sustainable dividends.
• The long term buy and hold mega-cap investor, patiently building capital growth by buying the FTSEs biggest businesses.
• The speculator, moving in and out of companies when short-term special situations and mispricing opportunities emerge.
• The shorter, placing bets on companies that look set for a fall.
• The analytical investor, patiently reading sets of financial accounts, because that is his or her individual edge.

And so on, and so on.

Style counsel

Put like that, its perhaps easier to see what Im driving at.

Would an income investor make for a good small-cap value investor, or a good speculator? I dont think so however much they might like the idea, or fool themselves into thinking that theyd be good at it.

My guess is that they might get lucky occasionally, but most of the time theyd be less successful than with their core income investing strategy.

So lets close by re-visiting that quote which I opened with.

If you always do what youve always done, youll always get what youve always got.

In other words, stick to what works for you, and youll carry on being successful.

If you always do what youve always done, youll always get what youve always got.

And if you carry on venturing into investments which dont suit your style, then youll carry on not being successful with them.

Not difficult, is it?