Investment Iron Law XIII: Act Now#
Those who require a fully justified reason for every action are never practitioners.
Taking Action is Better Than Just Researching#
A group of friends worked hard from sunrise to sunset, but their income remained meager. They envied others who invested in stocks, real estate, or other ventures and became wealthy. They lamented, “We toil all day, earning so little, while those investors make easy money.” Finally, they decided to seek guidance from an investment guru.
Knowledge Without Action is Useless
Touched by their sincerity, the guru agreed to teach them. The first lesson was “Investment Principles,” covering compound interest, returns, and risk management. The second lesson was “Investment Practice,” where the guru demonstrated how to invest in stocks, real estate, and other assets. He then asked, “Do you understand?” They all replied, “Yes!” The guru said, “Congratulations, you’ve graduated!” The group rejoiced and returned to their jobs.
Decades later, at a reunion, they complained, “Is there any way to make good money? Why do we always have to work so hard?” They revisited the guru, who asked, “Where did you put your earnings?” They answered, “In bank savings accounts.”
This story illustrates that education can change thinking but not necessarily behavior. Possessing knowledge and wisdom without action is no different from lacking them; you’ll still rely on physical labor and skills for a living. Wisdom without action is useless; one must be willing to act.
A survey of wealthy Americans revealed that one of their key traits is “proactive action.” In other words, financial success depends on what we do, not what we know.
Investment professors sometimes face student skepticism: “If you know so much, why aren’t you rich from investing?” A common response is, “A teacher’s duty is to impart knowledge, not necessarily to practice it. Just like the best coach isn’t always the best athlete.”
I often ponder this: Many teachers desire wealth. Wealth accumulation and educating the next generation aren’t mutually exclusive. Why don’t most investment professors, armed with financial knowledge, become wealthy?
Another common question is: “Some uneducated, idle speculators get rich through investing without ever taking an investment course. How?” The difference between professors and these speculators is simple: some professors know but don’t act, while speculators act but don’t necessarily know. Financial knowledge alone doesn’t guarantee wealth; action is key.
Action is the Key to Investment Success
Can investment skills be taught? No. True skill comes from practice. I often compare investing to ice skating, swimming, or cycling. Can reading books on “How to Ice Skate” make you a skater? The best teacher is experience – falling hundreds of times, getting back up, and persevering.
Fear is the biggest obstacle to learning about investing. A student once asked, “What if I lose all my money before I learn how to invest?” I countered, “Did you study fluid dynamics before learning to ride a bike, fearing you’d crash before mastering it?” Investors must understand that even extensive reading won’t prevent losses; just like a perfect score in fluid dynamics doesn’t guarantee perfect cycling.
Practice and experience are essential for practical skills. Investing can’t be taught. The key is to step away from books, enter the market, experiment, make mistakes, and learn from them. Start small with a limited amount of money.
Achieving wealth through investing involves two stages: 1) acquiring correct investment knowledge, and 2) continuous practice and action. Both are essential. Reading this book and understanding the principles is just the first step.
Knowledge Becomes Power Through Action
Knowledge is potential power. Only through absorption, internalization, and action does it become real power. “Knowledge is power” needs amending.
Correct understanding alone is insufficient. Achieving wealth requires consistent action and practice. Otherwise, knowledge remains theoretical. Investing is a skill honed through constant practice, like entrepreneur Wang Yung-ching, who continued massive investments in his 70s.
We instinctively avoid risk; it’s uncomfortable. But investing for wealth requires calculated risks, learned through experience. Dear reader, action is paramount. Initial fear and anxiety are natural. The best way to overcome them is to act.
1. Those who put ideas and methods into action possess a competitive edge and grasp the opportunity for success.
2. In today’s knowledge-rich world, the biggest obstacle to success is not knowing what to do, but doing what we know.
3. Many excel at thinking, analyzing, and identifying opportunities, but few act upon them.
A Farmer Outperforms Market Veterans
In early 1996, amid cross-strait tensions, Taiwan’s stock market slumped. A farmer walked into a brokerage, placed a bag of cash (around 3-4 million NTD) on the counter, and said, “I want to buy San Shang Yin.”
The clerk, baffled, asked for his account number, which stock he wanted (San Shang Yin refers to three different bank stocks), and his desired price. He knew none of this, saying only, “My friend said San Shang Yin is good. Here’s the money.”
The clerk explained the situation, helped him open an account, and bought 10 shares of each bank stock at around 90 NTD. Two months later, the prices rose to 160 NTD.
This farmer, lacking knowledge but daring to act, profited. Meanwhile, market experts who thoroughly analyzed San Shang Yin missed out because they hesitated to act.
Does knowledge or action bring wealth? The farmer’s lack of knowledge might have been his advantage, while overthinking paralyzed the experts. How much do analysis and knowledge truly contribute to wealth creation? It’s worth pondering.
Active action makes dreams come true. A strong desire for wealth fuels action.
Your Future Wealth is in Your Hands#
Many attendees at my seminars nod in agreement but fail to act. Remember, action, not knowledge, determines your future. This book is useless unless you act upon it.
Dreams Alone Won’t Make You Rich
Many dream of wealth, but few succeed. It’s not luck or intelligence, but the unity of thought and action. Success and wealth are earned through planning, action, and consistent effort.
For most, wealth is a fantasy. They think and talk, but don’t act. Some lack the know-how, which is understandable. Sadly, others know but don’t act. “Knowing and not doing is not knowing.” Wealth won’t come to those who only dream or accumulate knowledge without action. People attribute wealth to luck, but does luck favor those dreaming at home or those actively seeking opportunities?
Reading this book won’t magically make you rich. Financial success depends on what we do. We’ve all seen seemingly unintelligent, not particularly hard-working, or frugal people who are wealthy.
The difference between self-made millionaires and us isn’t intellect, effort, frugality, or knowledge, but where our money is placed. They invest in high-return assets, while we often settle for low returns. Most make excuses: not enough money, time, knowledge, or opportunity, or blaming age. These are merely excuses preventing wealth accumulation.
1. The principles of financial management are simple; the difficulty lies in overcoming fear, greed, and laziness to do what we know we should.
2. Investing is an art and a science, but more art. The best way to learn is by doing.
3. Without putting money to work, you’ll rely on physical labor and skills your entire life.
The First Step: Open a Brokerage Account and Buy Stocks
An elderly British writer lamented, “I’ve seen many talented young people remain obscure, their potential unfulfilled because they lacked the courage to try. Guidance and encouragement to take risks could have unleashed their talents and benefited society.”
Over 13% of seniors in Taiwan rely on continued work or family support. Many ended up this way because they didn’t invest in risky assets like stocks or real estate in their youth. Had they been guided to invest wisely, they could be enjoying retirement, reducing social inequality and promoting harmony.
Inspired by this writer, I now encourage my students to open brokerage accounts and buy stocks (or closed-end funds if unsure) on the first day of my investment courses. I advise them to hold long-term, regardless of price fluctuations, aiming for practical experience over theoretical knowledge.
Paying for Experience
In 1983, while pursuing my PhD at UC Berkeley, a Wall Street analyst lectured at the university. I asked him for book recommendations on stock investing. He advised, “The best way to learn is to invest. You’ll learn more from one real investment than from several books.” I followed his advice, lost money, and learned valuable lessons that shaped my future investment approach.
Financial management can’t be learned solely in the classroom. Can attending ten lectures on swimming theory and reading ten books on “Swimming Secrets” make you a swimmer? The first step is to get in the water. Taiwan’s education system overemphasizes book learning and neglects practical experience.
What’s the first step in learning to invest? Some suggest reading books, subscribing to financial magazines, or taking courses. My advice: after reading this book, invest a small amount in stocks or mutual funds (especially index funds) if unsure.
Mutual funds offer diversification and professional management, generally performing close to market averages, minimizing potential losses and discouraging fear.
Outperforming mutual funds through individual stock picking is challenging. Fund managers have experience, expertise, and research teams. Consider mutual funds, especially index funds like CTBC Harmony Fund or China 100 Fund, in the initial stages. “Beating the index” is every fund manager’s dream, but most admit it’s incredibly difficult. If so, mirroring the market through index funds is a viable strategy.
If you have savings and don’t own property, consider buying a home as your first investment.
We learn more from failure than from success. Success is built upon countless failures.
Learning from Mistakes#
Successful American investors share two traits: 1) they don’t strive for perfection, and 2) they don’t dwell on failures, focusing instead on future challenges. High returns come with high risks. Failure is inevitable and part of the learning process. Most successful investors have experienced multiple failures.
No Success Without Failure
Anyone claiming to have never lost money in investing is either lying or has never invested. It’s like a baseball player claiming to have never missed a swing. Even the best hitters don’t have a 100% batting average.
A top baseball player once attributed his success to “missing more swings than others.” To achieve a high batting average, he must have swung and missed more times than others. Biographies of successful people often reveal that they’ve experienced more failures than those less successful. Failure is the mother of success, especially in investing.
Aspiring investors must withstand losses. Those who haven’t failed can’t achieve greatness; those who haven’t experienced losses can’t expect to make a fortune. Demanding a perfect track record leads to extreme conservatism and eliminates opportunities for success.
The biggest failure is to never fail. Avoiding mistakes eliminates chances for success. The best path to success is through failure and learning from it. Never forget your losses; they are the keys to victory. Successful investors analyze failures, learn from them, and improve their strategies.
Reflect and Restart
My failures have led to reflection, reassessment, and improved investment strategies. Most failures bring unexpected benefits. Treat failure as a necessary lesson, and your courage will grow.
Failure can’t be learned secondhand. You won’t find books on “How to Lose 10 Million in Investments.” People brag about successes, not failures. Therefore, lessons from failure must come from personal experience.
Everyone makes mistakes in investing. Even correct decisions can lead to losses. Since losses and failures are inevitable, accepting them and learning from them is crucial. Failure is not shameful or terrifying. Face it, overcome it, and success will follow.
1. Take calculated risks for high rewards, be prepared for losses, and avoid undue self-blame.
2. Learn from every failure, identify flawed decision-making habits, and avoid repeating them.
3. Study valuable lessons from failures and discover opportunities for wealth creation.