The strategy for investing in my Stocks and Shares ISA keeps evolving. And constant refinement of the process is a good thing. Especially when it incorporates feedback and lessons from past winning and losing positions.
But on top of that, I often refer to books published by successful investors who have gone before me. And often these gurus say the same thing when describing the strategies and the tactics that worked for them.
It’s by developing and honing my strategy that I’m aiming for life-changing gains from stocks and shares over time.
Going for the big moves
And one book I return to often for insights is Reminiscences of a Stock Operator by Edwin Lefèvre. It pretends to be a fictional account of a stock market trader called Lawrence (or Larry) Livingstone. But really, the content comes from a series of meetings Lefèvre had with the real-life and controversial trader Jesse Livermore.
In essence, Livermore opened up to the writer about his stock trading journey and most of what he learnt along the way. And Lefèvre wrote it all down.
It’s a good read. And the book makes clear Livermore constantly strove to improve his process. For example, one thing he learnt was to play for the big market moves in each stock. He discovered the hard way that he tended to take profits too soon. And by the time he talked with Lefèvre, he said: “It never was my thinking that made the big money for me. It was my sitting tight.”
And by that he meant holding on to a stock until it had made its longer move rather than snatching short-term profits then missing the majority of the available rise.
These heavyweights agree
The advice chimes with billionaire investor Warren Buffett’s business partner Charlie Munger’s observation. He once said: “You don’t make money when you buy, and you don’t make money when you sell. You make money when you wait.”
But Buffett probably expressed the concept of taking a long-term approach best of all. He said: “Time is the friend of the wonderful company and the enemy of the mediocre company.”
Meanwhile, Mel Jenner at investment research company Edison recently quoted outperforming fund manager Nick Train. He said of investing in wonderful businesses: “over time, wonderful things happen to your wealth”.
So my plan is to find high-quality or ‘wonderful’ businesses with a fair valuation and a long runway for growth. Then I aim to hold some of their shares for the long term. And that’s how I’m shooting for life-changing gains in my Stocks and Shares ISA.
But even though I’m hunting for wonderful businesses and aiming for a long holding period, there’s no guarantee of life-changing returns. And that’s because all stocks and businesses can be prone to setbacks from time to time. Nevertheless, with those previously successful investors in agreement, I’m optimistic my long-term approach will deliver meaningful gains over time.
