The more I read the more I appreciate that what separates the legends of the investing game from most other investors is not vast chasms of knowledge, but rather a handful of simple processes they perform exceptionally well.
Processes like how they gather information, the features of a business they look for, and how they assess value. Great investors focus on what they know works and do it with clinical precision.
A lot of this comes with time and experience, but to speed things up here are three important things that successful investors do that regular investors often don't.
1. They accept change
Billionaire investor Howard Marks of Oaktree Capital believes that adaptability is one of the most important characteristics of successful investors.
"The only thing you can count on is change… no strategy, tactic or opinion will work forever." – Howard Marks
Technology, competition and social trends… they all change.
It's an especially important lesson for long-term investors who sometimes mistake the idea of 'buy to hold' investing with 'buy and forget'.
Take ASX-listed Coca-Cola Amatil Ltd (ASX: CCL) as an example. The U.S. version of the company may be a favourite of Warren Buffett who has owned the company for decades, but ASX listed Coca-Cola Amatil has suffered over time at the hands of competition and has performed poorly for investors over the last five years.
Similarly, not so long Woolworths Limited (ASX: WOW) was regarded as an investment to hold for life. But new competition in the supermarket industry has dragged down margins and shares have fallen 20% in the last 12 months. Things change, and great investors are prepared to change their investing thesis in response.
2. They leverage their advantage
Great investors know where they have an advantage and make it central to their investing process. For you this might mean having an aptitude for numbers, intimate understanding of a particular industry, or simply being more disciplined than anyone else.
Similarly, great investors also know their weaknesses and shortfalls and take steps to protect themselves from these shortcomings.
3. They study and emulate the best
If you can't beat 'em then studying great investors is the next best way to improve your own skill and ability. Warren Buffett is well known as a student of Benjamin Graham, but also for learning from his business partner Charlie Munger.
Many other great investors took inspiration from professors or authors throughout their development. With a huge number of case studies and information available online it's easy to study up and emulate the legends you most relate to.
