My Worst Investment Ever Podcast Gary Belsky – Long-Term Patience Is the Key to Success in Investing
BIO: Gary Belsky is co-author of Why Smart People Make Big Money Mistakes—And How To Correct Them: Lessons from the Life-Changing Science of Behavioral Economics and the former editor in chief of ESPN The Magazine and ESPN Insider.com.
STORY: Gary waited for seven years to invest in the Berkshire Hathaway stock hoping the price per share would drop. He missed out on the compounding for the seven years and earned a 14% return instead of 18%.
LEARNING: A stock isn’t cheap because it’s $5. A stock is cheap if the Price-to-Earnings ratio is low.
“In the short run, people regret actions, but in the long run, they regret inactions.”
Gary Belsky
Guest profile
Gary Belsky is co-author of Why Smart People Make Big Money Mistakes—And How To Correct Them: Lessons from the Life-Changing Science of Behavioral Economics. The former editor in chief of ESPN The Magazine and ESPN Insider.com, Belsky is president of Elland Road Partners, a storytelling consulting firm based in New York City.
Worst investment ever
Gary was working for Money Magazine when he got assigned to write a story about Warren Buffett in 1992. As he researched the story, Gary got convinced that Buffett was an investing genius. This convinced him to invest in the Berkshire Hathaway stock. However, the stock was selling at $8,000 a share at the time. Gary decided to wait for the stock price to go down. He invested in the stock in 1999.
Had Gary invested in the stock in 1992, he would have had an average annual return of about 18%. But since he waited until 2009, he only got a 14% average annual return. Over that period, the market was up by about 9%. So he still outperformed the market, but he also missed the compounding between 1992 and 2009.
Lessons learned
- A stock isn’t cheap because it’s $5. A stock is cheap if the Price-to-Earnings ratio is low.
- The way people lose money in the stock market is not nearly so much about making bad investments. It’s about trading too often.
- Long-term patience is the key to success in the stock market.
Andrew’s takeaways
- Take advantage of the compounding effect because even if you’re an average stock picker, you’ll still have a massive amount of return if you invest for the long term.
- When you learn something, write it down, internalize it and implement it. You’ll be amazed at what you’ll have achieved when you look back 10 years later.
- Bring people into your decision. Even if it’s just one other person, you’re almost assured the decision will become better.
- As a startup, produce a monthly financial statement of your P&L, balance sheet, and cash flow, and talk to your management team about it once a month.
Actionable advice
Ask yourself who’s the person that is most likely to annoy you if you asked them what they think about something and then ask them.
No.1 goal for the next 12 months
Brent’s goal for the next 12 months is to finish a project he’s working on.
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Connect with Brent Kochuba
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points