Think Like the Great Investors: Make Better Decisions and Raise Your Investing to a New Level

Chapter 29

Plan to succeed

In the preface to Benjamin Graham’s book The Intelligent Investor, Warren Buffett wrote that the two things an investor needs to succeed are:

• good decision-making skills

• discipline when under pressure.

Another way of saying this is that investment success requires learning to follow a sound investment plan.

An investment plan is a statement of objectives, strategy and tactics that describe how the investor is intending to operate. The plan should contain all the information needed to make investment decisions that manage the uncertainty that is inherent in the investment game. The plan will describe the kinds of stocks to be bought, when to buy them, how many stocks to buy, when to cut losses or take profits and lots more.

Every investor must develop a plan that will meet their objectives and is compatible with their investing horizon, knowledge, skills, experience, risk tolerance, attitudes, beliefs and personality. Unless it does that, the investor will not be comfortable with it and will not have the deep confidence in it that will enable them to hold to it when under pressure in the market. Faithful execution of the plan is more important than its detail.

There are many ways to make money in the markets, meaning there is no single plan that is right for everyone. Most people can find a method that gives positive results. This means they have ...