20 Investment Lessons From The First Half Of My Career

Lessons learned from two decades in investing

Over the years, I’ve come to believe that each year spent in investing reveals at least one critical lesson.

With two decades under my belt, this belief has been proven true time and again. There were years when the lessons came slower, particularly when I was deep into my Master’s in Taxation.

In this article, I want to share 20 of the most valuable lessons I’ve gathered along the way, focusing mostly on individual stock investing. These lessons have shaped my approach:

1. Disciplined patience

2. Harness the power of compounding

3. Avoiding impulsive decisions

4. Focus on quality

5. Avoiding debt

6. Thinking independently

7. Find competitive advantages

8. Diversifying the right way

9. Understanding market cycles

10. Accepting losses and moving on

11. Emotional discipline

12. Building and refining an investment thesis

13. Extensive due diligence

14. Networking and learning from others

15. Keeping up with industry trends

16. Investing in what you know

17. Avoiding market timing

18. Building a position with risk tolerance

19. Clear exit strategy

20. Gradually, then suddenly

1. Disciplined patience

When I started my journey as an investor in 2007, I quickly realized that the stock market has a way of testing your patience. It's easy to get caught up in the excitement—or fear—of short-term market movements. But if there's one thing I've learned over the years, it's that investing is a marathon, not a sprint.

The key to success is having the discipline to stay focused on the long-term, even when the market is throwing curveballs your way.

2. Harness the power of compounding

Patience isn’t just about weathering the storms—it’s also about giving your investments the time they need to grow. The power of compounding, where your returns generate their own returns, is one of the most powerful forces in investing. But compounding takes time, and the real magic only happens if you’re willing to be patient and let it work over years, even decades.

Story Time

Like many new investors, I was tempted to react to every piece of news that seemed like it could move the markets. I vividly remember watching a Netflix fall apart in 2008-2009 after some negative press around its transition to streaming and competition from now defunct blockbuster.

In a panic, I sold my shares, only to see the stock bounce back stronger a few months later once the market realized that it had overreacted. It has become a tough lesson after seeing this stock perform the way it did, but it taught me something invaluable: trust your analysis, ignore the short-term noise, and stay committed to your long-term strategy.

Patience is rewarded: As highlighted in the above graph, an investor who held onto Netflix shares for the long term would have seen tremendous returns. A $1,000 investment from the IPO would now be over $500,000.

3. Avoiding impulsive decisions

The ability to wait for the right price requires resisting the urge to make impulsive decisions based on short-term market movements. Patience can produce uncommon profits, and the ability to sit and do nothing until the right opportunity arises is a rare and valuable skill

Patience is also crucial when it comes to buying at the right price. It’s tempting to jump into a stock that’s soaring or to sell out of fear when prices drop. But often, the best opportunities come when you wait for the right moment—when a great company is temporarily undervalued or when the market has overreacted to short-term news. Knowing when to act and when to hold back is an art, and it’s one that requires a steady hand and a lot of patience.

Patience as a Virtue: Legendary investors like Warren Buffett and Charlie Munger have often highlighted patience as a critical component of successful investing. Buffett famously stated that the stock market is a device for transferring money from the impatient to the patient (more on this here). This underscores the idea that waiting for the right price can lead to significant gains when others act hastily.

4. Focus on quality

Focusing on quality refers to prioritizing companies with strong fundamentals, sustainable competitive advantages, and robust business models. It's about looking beyond just cheap stocks and instead seeking out well-run businesses that can withstand economic downturns and generate consistent returns over time.

It is concentrating on the fundamental strength and long-term prospects of a business. While it may require more patience and thorough analysis, this approach can lead to more stable, profitable, and satisfying investment outcomes over time.

To measure quality, consider key metrics like Return on Equity (ROE) for profitability, Debt-to-Equity Ratio for financial stability, and Free Cash Flow (FCF) for a company’s ability to generate cash. Also, look for consistent Earnings Per Share (EPS) Growth and healthy Gross Profit Margins. Evaluate the company’s competitive advantage, check management’s track record, and ensure you’re not overpaying by using valuation ratios like P/E and P/FCF.

5. Avoid debt

Avoiding excessive debt is a crucial principle in investing, as it contributes significantly to a company's financial stability and resilience.

Warren Buffett, famously said, "If you're smart, you don't need it; if you're dumb, you shouldn't use it." This philosophy underscores the risks associated with high leverage.

Companies with low debt levels are better positioned to weather economic downturns, market volatility, and unexpected challenges. They have more flexibility to in

vest in growth opportunities, research and development, or return value to shareholders through dividends or share buybacks. Companies with minimal debt often have stronger balance sheets, which can lead to lower borrowing costs if they do need to access capital markets.

From an investor's perspective, avoiding heavily indebted companies reduces the risk of permanent capital loss, as these firms are less likely to face bankruptcy or severe financial distress.

The key is to seek out companies that maintain a healthy balance, using debt strategically without compromising their financial health or future prospects.

6. Think independently

Strike a balance between avoiding the crowd and being contrarian for its own sake. Market inefficiencies often arise from herd behavior and popular stocks may become overvalued due to excessive optimism. That is when overlooked or unpopular stocks may present attractive opportunities.

However, the market is often right, and blindly opposing it can lead to poor decisions. Some popular investments may still offer good value. Constantly opposing the consensus can lead to missed opportunities.

7. Find competitive advantages

In investing, seeking out companies with sustainable competitive advantages—also known as moats—is crucial for long-term success. These advantages could come from various factors such as brand strength, patents, cost leadership, network effects, or scale.

Companies and industries that possess these moats are better equipped to fend off competition and maintain profitability over the long run. For example, Apple’s ecosystem of products and services creates a formidable barrier to entry for competitors, leading to consistent market dominance and strong financial performance.

Understanding and identifying these moats is essential in assessing whether a company is likely to continue thriving in the face of competition. Investors who focus on such companies can benefit from steady growth and reduced volatility over time.

8. Diversifying the right way

Diversification is often touted as a fundamental principle of risk management, but it’s important to diversify the right way. Simply owning a large number of stocks isn’t enough; effective diversification means spreading investments across different industries, asset classes, and geographies. This approach helps mitigate risks specific to any single sector or region.

A well-diversified portfolio can withstand market fluctuations better, as the performance of different assets tends to balance out over time. However, over-diversification can dilute potential returns. It’s about finding the sweet spot where your portfolio is protected from significant risks without sacrificing the potential for growth.

A good way to think about it is investing in companies where the revenues of one business is an expense line item for another business. For example, airlines and oil companies. For airlines, jet fuel is an expense, but for an oil company it will be part of its revenues.

More examples:

• Automobile manufacturers and steel companies

• Food and beverage companies and agricultural producers

• Construction companies and raw materials suppliers

• Pharmaceutical companies and healthcare providers

9. Know where you are in the cycle

The economy and market moves in cycles, and recognizing where we are in the cycle can greatly influence investment decisions. Whether it’s a bull market, bear market, or a period of economic recession or expansion, each phase presents unique opportunities and risks.

An awareness of where you are in the cycle allows investors to adjust their strategies accordingly, whether that means being more aggressive during downturns when valuations are attractive or being more cautious during periods of exuberance.

A notable example from the 2020-2022 period centers on the homebuilding industry. When the COVID-19 pandemic first hit, interest rates were slashed to historic lows to stimulate the economy. Initially, homebuilder stocks took a sharp dive as investors feared a repeat of the 2008-2009 housing crisis.

However, the low interest rates quickly led to an unexpected surge in housing demand, as cheap mortgages made homeownership more accessible.

Additionally, the shift to remote work and a growing desire for more space fueled a wave of new home purchases, particularly in suburban and rural areas.

10. Accepting your losses and move on

No investor is immune to making mistakes, but the key is learning from them and not letting losses define your investment strategy. Holding onto losing investments in the hope they will bounce back can tie up capital that could be better used elsewhere.

Accepting losses, cutting your losses early, and moving on is a crucial part of disciplined investing. For instance, if an investment no longer aligns with your original thesis or if new information suggests the outlook has deteriorated, it’s better to exit the position rather than waiting for a turnaround that may never come.

Emotional attachment to an investment can cloud judgment, leading to bigger losses down the road.

11. Emotional discipline

Emotional discipline is crucial in investing, as the market's highs and lows can easily trigger reactions driven by fear or greed. Without discipline, you might chase trends during booms or panic-sell during downturns, both of which can derail your long-term strategy.

A well-defined investment plan, with clear criteria for buying and selling, can help keep your emotions in check. However, be aware of common behavioral biases that can undermine your discipline.

• Overconfidence might lead you to take on too much risk, believing you can time the market.

• Loss aversion could cause you to hold onto losing investments longer than you should, hoping they'll bounce back.

• Herd behavior might push you to follow the crowd instead of sticking to your strategy.

Recognizing these biases and committing to a disciplined approach can help you stay on course, making decisions based on logic rather than emotion.

12. Building an investment thesis

Writing down your investment thesis is a powerful tool that can help you stay focused and disciplined. An investment thesis is your rationale for why you believe an investment will succeed. By putting it in writing, you create a clear, logical framework that guides your decision-making process. This written thesis acts as a reference point, helping you stay true to your strategy, especially during periods of market volatility or when emotions threaten to take over.

My structure for an investment thesis:

• Company Overview: Brief description of the company’s business model, industry, and competitive position.

• Investment Rationale: The main reasons why the security is a good investment.

• Competitive Advantage (Moat): Explanation of the company's sustainable competitive advantages (e.g., brand, technology, cost leadership).

• Financial Metrics: Key financial metrics supporting the investment (e.g., revenue growth, profitability, free cash flow, debt levels).

• Valuation: What is the intrinsic value of the company, and how does the current market price compare to it? What is the market overlooking? Margin of safety? Current pricing (EV/EBIT, P/E, P/FCF) vs. historical averages and industry peers?

• Catalysts: Potential upcoming events or developments that could drive the stock price higher.

• Risks: Key risks or potential downsides to the investment (e.g., competition, market downturns, regulatory challenges).

• Investment Horizon: The expected timeframe for the investment to play out (short-term, medium-term, long-term).

• Exit Strategy: Criteria for selling the investment (e.g., target price, changes in fundamentals, risk tolerance).

13. Extensive due diligence

Before you invest in anything, it's really important to do your homework. This means digging into the company's financials, understanding how it makes money, knowing who its competitors are, and figuring out any risks involved. The more you know, the better decisions you can make.

I learned this the hard way early in my career. I once invested in a company that looked promising on the surface, but I didn’t do enough research. A few months later, the company’s leadership ran into serious problems, and the stock price dropped. If I had done more homework, I could have avoided that mistake.

14. Networking and learning from others

You can't know everything, and that's why it's important to connect with other people who invest. Talking to others, whether it’s friends, mentors, or even people you meet at events, can give you new ideas and help you see things differently. Early in my career, I made it a point to chat with experienced investors whenever I could.

Learning from others has been one of the best ways to keep growing as an investor. It’s not just about what you know, but also what you can learn from the people around you.

15. Keeping up with industry trends

The investment world changes fast, so it’s crucial to keep up with new trends. Whether it’s technology, regulations, or consumer habits, being aware of what’s happening helps you make smarter choices.

I missed the boat when Nvidia went from being a big name in crypto mining to becoming an AI powerhouse. I didn’t see it coming because I wasn’t paying enough attention to the AI world. Keeping an eye on trends like this can really help you stay ahead and jump on new opportunities.

16. Stick to what you know

Investing in areas you understand is often the smartest move. If you know a lot about tech, it makes sense to invest in tech companies rather than diving into industries you’re unfamiliar with. This approach helps you make better decisions and reduces the risk of costly mistakes.

Whether it’s tech, healthcare, or retail, sticking to what you know allows you to invest with more confidence and clarity. It’s about leveraging your expertise to make smarter decisions and avoid getting burned by things you don’t fully understand. That doesn’t mean you can’t learn about new industries or expand your knowledge base, but it’s important to recognize the value of staying in your lane when it comes to putting your money on the line.

17. Don’t try to time the market

Trying to guess the market’s ups and downs is a losing game. Even the pros can’t do it consistently. Staying invested over the long term has proven to be far more successful than trying to jump in and out of the market (see this chart).

A good example of the risks of market timing happened in 2008 during the financial crisis. Many investors panicked and pulled their money out of the market after it crashed, hoping to avoid further losses. However, those who stayed out too long missed the early stages of the recovery in 2009, when the market rebounded sharply. Those who remained invested, saw their portfolios recover and grow as the market surged over the following years.

Instead of trying to time the market, I’ve found that a more effective strategy is to stay invested and focus on the long term. By maintaining a well-diversified portfolio and sticking to a solid investment plan, you can weather the ups and downs without constantly second-guessing yourself. This approach not only reduces the stress and anxiety that come with trying to predict the market’s next move, but it also positions you to benefit from the market’s long-term growth.

In the end, it’s not about catching every wave perfectly—it’s about being in the water and riding the long-term trend. Trying to time the market can lead to costly mistakes, but sticking to a disciplined investment strategy has proven time and again to be the more successful approach.

18. Know your risk tolerance

Investing isn’t just about chasing returns; it’s about understanding and managing the risk that comes with those returns. At its core, risk tolerance isn’t just about numbers or percentages—it’s about your ability to stick with your investment strategy, enduring the inevitable discomforts and not making impulsive changes when the market turns against you.

My understanding of risk tolerance was deeply shaped by the 2008 financial crisis. Back then, I was still early in my career and, like many, focused on maximizing returns. My portfolio was heavily weighted toward equities, particularly high-growth stocks, which had performed exceptionally well in the lead-up to the crisis. On paper, my strategy looked sound.

However, when the market began to unravel, I quickly realized that my portfolio was far more vulnerable than I had anticipated. The sharp declines weren’t just a financial blow—they were emotionally exhausting. Watching the value of my investments drop day after day, I felt the full impact of having taken on more risk than I was truly prepared to handle.

This experience was a profound wake-up call. It taught me that risk tolerance isn’t just about how much volatility you think you can handle in good times; it’s about what you can endure when the market turns against you. The real test of risk tolerance is your ability to stay the course, even when the pain of losses tempts you to abandon your strategy.

The lesson I took from 2008 was clear: High returns might be enticing, but they’re not worth it if they come at the cost of sleepless nights and constant worry. Respecting the market’s unpredictability and aligning my investment strategy with my true risk tolerance has since become a cornerstone of my approach. It’s about finding a balance that allows you to invest confidently, knowing that you can withstand the tough times without losing sight of your long-term goals.

19. Have an exit plan

Knowing when to sell is just as important as knowing when to buy. Set clear criteria for when you’ll exit an investment, whether it’s hitting a target price or a change in the company’s fundamentals. This way, you avoid holding onto a stock too long and risking a loss.

Take Apple, for instance. Back in 2014, I saw it as a fantastic investment. The company was innovating rapidly, executing on its growth trajectory, and its stock was relatively undervalued given its growth prospects. Over the years, Apple continued to deliver strong returns. However, by 2024, I noticed that Apple’s valuation had risen substantially, making it harder to justify holding the stock at those levels given the future potential growth rate. The company was still strong, but the potential for future gains didn’t seem as promising compared to its past performance.

20. Gradually, then suddenly

My last lesson is about recognizing that significant changes often start quietly at the edges, almost unnoticed, brewing at the fringes of society before they explode into the mainstream. Transformation typically begins at the margins. These changes often seem small and insignificant at first, but they gradually build momentum until they’re reshaping entire markets.

Take the AI revolution, for example. For years, advancements in AI were unfolding quietly, particularly in the development of GPU chips and Large Language Models (LLMs).

GPUs, originally designed for video game graphics, started to be used for processing the massive amounts of data required for AI, but this shift was largely under the radar. Meanwhile, Large Language Models were being trained on vast datasets, their potential recognized only by those deeply embedded in AI research.

What truly set the stage for AI’s explosive growth was the gradual decrease in the cost of these powerful GPUs. As NVIDIA’s chips became more affordable, it suddenly became feasible to build massive server farms and cloud centers capable of running complex AI models.

This drop in costs was a pivotal technological evolution that allowed AI to move from a niche concept to a mainstream force, enabling transformative applications that impact everyone. Companies like NVIDIA, which had been investing in GPU technology, found themselves at the forefront of this revolution, with their stocks soaring as the demand for AI capabilities surged.

This example is just one of many that illustrate how major market shifts often start at the margins, unnoticed by most. Think of how digital payments evolved similarly—starting with credit card terminals and small-scale online transactions, only to explode into the mainstream with the advent of smartphones, contactless payments, and platforms like PayPal and Square. Or consider the rise of e-commerce, which began modestly in the 1990s with companies like Amazon selling books online. It wasn’t until broadband internet became widespread and fulfillment technology improved that e-commerce transformed retail, forever altering how people shop.

Another example is the adoption of renewable energy. Solar and wind power were once expensive, niche energy sources. But as the cost of solar panels and wind turbines fell, driven by advancements in manufacturing and economies of scale, renewable energy began to play a significant role in global power generation, reshaping the energy market.

These examples show that by staying attuned to subtle changes—especially those that lower costs and make new technologies accessible—you can position yourself to benefit when they begin to reshape the broader market.

It’s about being patient, observant, and recognizing that the biggest opportunities often emerge from small, gradual beginnings.

Coming Soon…

In our next edition, we’ll dive into the fascinating world of emerging AI applications and explore how this groundbreaking technology is transforming industries, improving efficiency, and opening up new investment opportunities. From healthcare to finance, AI is reshaping the future, and we’ll break down what it means for you and your financial strategy.

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