How to Win Big-Time at Investing—and Life!

Who doesn't want to be richer and wiser and happier? We all do, sure. But getting there ain't that easy. So, it is a good thing that author/journalist William Green has come along with his new book called, well Richer, Wiser, Happier: How the World's Greatest Investors Win in Markets and Life.

The book, available now in all forms of media, takes lessons from some of the more famous money folks and shows us how to apply them to our own everyday lives. "It is remarkable," Green says. "how consistently the greatest investors talk about...the importance of just avoiding catastrophe, staying in the game (and) surviving dips."

I got to the bottom of that and more with William as part of as part of my Newsweek/LinkedIn interview series, Better, where I talk with business leaders, authors and founders about their latest innovative ideas and trends.

Here are some takeaways and highlights, with a bonus post-interview question or two thrown in, from my conversation with William Green. His answers have been edited for clarity.

Reduce Your Fragility

Instead of trying to predict the future, try to consciously reduce your fragility. Think about your exposure. One of the simple things I would encourage people to do is ask themselves the simple questions, "Where am I fragile? Do I have all my money in one bank? In one country? With one investor? Do I have it all in one stock and, do I understand that stock? The less speculative you can be the better because you really want to position yourself as Matthew McLennan said, "To survive the dips." COVID is a spectacular reminder that there are dips in any lifetime whether it is a pandemic, or a problem marriage, or you get laid off.

You need to live within your means and not have too much leverage and too much debt. It's remarkable how consistently the greatest investors talk about the importance of just avoiding catastrophe, staying in the game and surviving the dips.

Warren Buffett & Charlie Munger
Buffett and Munger: When in doubt, go with index funds JOHANNES EISELE/AFP/Getty

Teach Your Kids the Wonders of Compounding

Get your kids to start investing early because once you show them what will happen to say a hundred dollars or a thousand dollars over 10, 20...40 years, it's amazing. I went to India with this extraordinary guy, Mohnish Pabrai, who is talking to these poor, yet high I.Q kids, about his daughter who had $4800 from a summer job. If at 17 she invested the $4800, it could turn into millions in 60 years. The kids were wide-eyed and he said: "Are you going to remember the power of compounding?" And they all go, "Yes sir."

Clone Your Way to Success
Cloning is an incredibly powerful tool that most people don't use. Pabrai, for example, is at an airport and he's reading a book by legendary investor Peter Lynch and he sees Warren Buffett's returns. He asks: "what if I could figure out exactly what Buffett did...if I could reverse engineer it, replicate it and relentlessly apply those rules in life and the way I invest. He calls this cloning and you could call it mimicry. You could call it modeling or whatever you want.

And so, what he did is he went and really figured out the laws of investing that have been revealed by Buffett and his partner Charlie Munger, really by just reading and then going for 20 years running to the Berkshire Hathaway annual meeting. This idea of actually reverse engineering what people who are wiser and smarter than us have already figured out, instead of trying to reinvent the wheel, is incredibly powerful.

When I was originally trying to figure out how to write this book, I went to books from Michael Lewis, Malcolm Gladwell and other non-fiction writers who were extraordinary. Malcolm Gladwell starts with an idea and then he takes characters and stories to illustrate the idea. (But) cloning is not blind replication. It's not stupid, senseless replication. It's taking the habits, the insights and the principles that really smart people have figured out—and figuring out how it applies to your circumstance. It has to be aligned to your own talents.
There's no point in my trying to clone Tiger Woods. It's just not going to work.

Linked_Green Headshots
Clark and Green

Know Your Inner Investor Self

All of these great investors that I interviewed are people who have beaten the market by a mile. And most of them end up saying, "Yeah, most people should buy index funds." There's great strength in being self-aware enough to ask, am I wired to win this game? Do I have the informational advantage. Do I know more than other people? Do I have a temperamental advantage? Or do I tend to get carried away when things are tough and the market's falling apart? Do I get panicked when its going up massively and I want to jump on the bandwagon?

Knowing yourself and knowing whether you are actually equipped to win this game is a very powerful thing. And the wonderful thing about investing is there's this great default option...you can go to a company like Vanguard and buy something like a Total Market Fund.

Look, if think you're someone who can win this game, there are principles in my book where I show you how people like Buffett, Pabrai and Munger do it. But for most of us, it's very wise to just invest in index funds in a fairly diversified way.

Can You Build a Nest Egg When You're Older? How?

Depending on your age, I think it's especially important to focus first on preserving your capital instead of taking wild risks by speculating too aggressively, which could easily put you further behind. The last thing you want to do is lose money that you can't afford to live without, and then have to start rebuilding without that much time to catch up.

In order to achieve financial resilience, it's also really important and helpful to reduce or eliminate debt and beware of excessive expenses. I think those relatively mundane moves of living within your means and keeping your expenses down give you much more latitude to invest for growth in the stock market in a patient, long-term manner, so you won't suddenly need to cash out of stocks at precisely the wrong time because you're short on cash.

In my book, I also quote a legendary investor named Irving Kahn, whom I interviewed when he was 108, a few months before he died at the age of 109. Kahn said to me that the secret of investing could be expressed in one word: "safety." He explained: "Considering the downside is the single most important thing an investor must do. This task must be dealt with before any consideration can be made for gains."

I think that's the case for all of us, regardless of our age—that we need to think first about not losing. But that's all the more important when you're coming to the game relatively late because you don't have as much time to recover from your mistakes. You don't want to take so much risk in your attempt to catch up that you do something reckless and self-destructive, especially at times when the mood in the market is relatively bullish, as it is now, and too many people are throwing caution to the wind.

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Dorie Clark, author of Entrepreneurial You and Duke University Fuqua School of Business professor, hosts Newsweek's weekly interview series, Better, on Thursdays at 12 p.m. ET/9 a.m. PT at newsweek.com/linkedinlive. Sign up for updates at dorieclark.com.

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