There are two people in all of us. The person you are and the person you ought to be. It’s your job to make sure they meet. After Getting Started, your focus shifts to Getting There. The journey could take months or years, so you need to first get your mind right. The only thing you have control over is your attitude. Every day wake up grateful and thankful for what is right in your life. When you feel uninspired, listen to or read something that will inspire you. It will make you 10x more productive. Get rid of negative people from your life. The person who has never done anything is the one who is sure it can’t be done. Don’t waste time fighting battles with small-minded people. Walking away from an argument is a sign of strength. Stop obsessing about what’s in the rear view mirror. Every obstacle, every setback and struggle was preparation for the victory ahead. It is time to focus on Getting There and what is important.
Investing’s greatest lessons can’t be taught in a book or in a classroom. They have to be experienced and often times the teacher is loss. 90% of successful investing is controlling your emotions when your money is on the line, which is also why paper trading/investing is almost useless. Some of the best lessons occur when you don’t even realize the lesson is taking place. It takes a great deal of patience and discipline to just sit and wait for the market to educate you and for your portfolio to snowball. It isn’t easy, but don’t give up. As Les Brown says, “It’s Not Over Until You Win”.
Investing might not be physically exhausting but it sure is mentally draining. You may be frustrated but don’t let fear slow you down and steal your courage. The battleground isn’t in the market, it’s in your mind. The current market environment has been challenging. I can speak from experience that investing is very easy until it isn’t. What I believe to be true is the shorter your investment time horizon the more you have to worry about market conditions. Many people have short-term aspirations and goals that are tied to their portfolio performance. “Well, in a year I expect these stocks to double, and then I can buy this car or house or quit my job”. We all want to reach our goals quicker but it’s harmful to have time frames on things that are outside our control. Stocks rarely perform in the time frames we predict, and it’s why the market only works for investors that have a long-term portfolio focus.
Microcap companies are illiquid and volatile. Stock price moves of +/- 10% on a weekly or even daily basis are the norm. Most investors are OK with volatility as long as it’s only to the upside, but become unnerved when it occurs to the downside. Volatility doesn’t increase risk, transposing short-time frames onto your portfolio increases risk. Not knowing what you are doing increases risk, not illiquidity. Some of the riskiest investments are the ones everyone else owns. Illiquidity and volatility are friends of the long-term investor. Focus on the long-term.
Many investors haven’t invested through a bad market environment or if they have it was with an insignificant sum. You’ve grown your capital over the last five years during a bull market, but the truth is you don’t know how good you are until you’ve invested through a bear market. A strategy that’s tested is a strategy that can be trusted. During bear market corrections even the best investor’s portfolios go down. Warren Buffett’s portfolio (via Berkshire Hathaway) has dropped 50% or more four times. If you are investing in growing profitable microcap companies that don’t need to raise money you can afford to wait out the market cycle. It’s important not to capitulate and sell. Successful investors can disconnect emotion from investment decisions and can differentiate business performance from stock performance. When emotion compels you into making a bad trade-investment, remember that there is a successful investor on the other side of that trade.
“When you sell in desperation, you always sell cheap.” – Peter Lynch
During the bear market of 2008-2009 I was primarily invested in two microcap companies. One of those companies did very well, going up 300% during the crisis. The other company went down 70% in four months. The company stayed down for several months, and when the overall market sentiment turned in early 2009, the stock snapped back regaining all that was lost in less than three months. Capital flows back into quality companies first. Berkshire Hathaway stock recovered after each 50% drop because it owns quality businesses and capital ultimately flows back into quality. MicroCapClub member Rod MacIver said so eloquently in this article, “Money has an almost metaphysical attraction to places where it is put to careful, good use.” Buy and hold quality businesses.
If history has taught us anything it’s that bad market environments are the best time to find great companies early. The combination of lower valuations and less competition looking for new ideas creates incredible opportunities. Most investors complain, get emotional, and stop looking for ideas during bad markets. It’s also why most investors don’t beat the market. If the opinions of the herd make zero impact on you, then you are ready to make money.
MENTOR: a wise and trusted counselor or teacher
You need a mentor. Since my early 20’s my goal was to be a full time private microcap investor, but I knew I couldn’t get there by myself. I needed to find a mentor. Even today after reaching this early goal, I still need a mentor. Fear and greed are powerful forces that can wreck your portfolio, so it’s good to have someone to look up to for advice. A mentor can be someone you work for (or with) or simply being advised by someone that is a reflection of what you want to be. This is great career advice from Warren Buffett:
You need a mentor you can actually communicate and have a relationship with. I can learn from Warren Buffett’s letters and lectures but he is on another planet. He hasn’t invested in microcaps for 60 years. You need a mentor that is 10 steps ahead of you, not 1,000. Look out ten years and figure out where you want to be, and then go find someone that is there today. Find the person you aspire to be not just financially, but relationally, spiritually; a person with integrity, as well as tenacity. An illogical, irrational, relentless person that doesn’t believe in mediocrity. Find them and learn from them. Never seek advice from people that haven’t done what you are about to do.
“Go as far as you can see and when you get there you will always be able to see further” – Zig Ziglar
When you “Get There”, stay hungry. Your goals should constantly evolve so that you’ll never entirely achieve them. As you set out to Get There again, and again, you will need the help of others. If you can accomplish all your goals by yourself you aren’t thinking big enough. Have a positive attitude and think the best of people instead of the worst. You can’t reach your dreams without believing in and trusting others. Lastly, Hope isn’t the way to invest, but it’s the only way to live. Give it to others. When you see someone stumble, lift them up. Spend every day learning and educating, inspiring and motivating, giving hope to the hopeless, and declaring war on mediocrity.
MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $300m market cap) trading on United States and Canadian markets. MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. MicroCapClub’s mission is to foster the highest quality microcap investor Community, produce Educational content for investors, and promote better Leadership in the microcap arena. If you are a passionate microcap investor, Join Us.