Michael Steinhardt is the author of the book No Bull: My Life In and Out of Markets Which investors prefer to read for long time investment success.
The book gives an account of some of the investment strategies that drove Steinhardt’s historic success as a hedge fund manager, including a focus on his skills as an industry analyst and an exemplary stock picker. The book also reveals Steinhardt’s exceptional ability to spot when to trade against the prevailing market trend, a talent that resulted in many of his greatest successes.
Steinhardt thought like a long-term trader but used his insights to make short-term strategic trades. “I really shorted a lot. I liked shorts. I felt far more gratification from making money on the short side than from the long side, which is a very dangerous thing because the short side is so tough,” he said in his book.
Steinhardt’s six golden rules of investing. Let’s have a look.
- Make all your mistakes early in life. –
Steinhardt believed that investors should make all big mistakes early in life so that they could learn from them and make fewer errors later on. “A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something. Anyone who thinks he can formulate a success in this market is deluding himself because it changes too quickly,”
2. Always make your living doing something you enjoy.
Investors should devote their full intensity for success over the long term and enjoy whatever they are doing. “You have to be intellectually honest with yourself and others. In my judgment, all great investors are seekers of truth,” he said.
3. Be intellectually competitive.
The market guru was of the view that investors should do constant research on subjects that can make them money. “Plow through the data so as to be able to sense a major change coming in the macro situation,” he said.
4. Make good decisions even with incomplete information
Steinhardt said investors never have all the data they need before they put their money at risk, as investing is all about decision-making with imperfect information. “Make good decisions even with incomplete information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation,” he said.
5. Always trust your intuition.
Intuition is more than just a hunch as it resembles a hidden supercomputer in the mind that investors are not even aware of, he said. Intuition can help investors do the right thing at the right time if they give it a chance. “Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided,” he said.
6. Don’t make small investments.
The hedge fund manager said investors only have limited time and energy so when they risk their money by investing, they should make sure the reward is high enough to justify their investment. “Do not make small investments. If you are going to put money at risk, make sure the reward is high enough to justify the time and effort you put into the investment decision,” he said.
7. Traits of a good trader
According to Steinhardt, a good trader has to have three qualities-
- A chronic inability to accept things at face value
- Feel continuously unsettled
- Have humility
He said a good trader knew more and perceived the situation better than others.
8. Be contrarian
When investors’ views are truly contrarian, they are inevitably uncomfortable. Hence, investors need to have the cour.