On the Surface, Winston Churchill and Investing Have Very Little to Do with One Another. But You Can Apply Many of Churchill’s Lessons to Your Investing Approach.
The other day I stumbled into my house with a huge pile of books compliments of a bookstore’s going-out-of-business sale. My wife glanced at the first few books, arched her eyebrows and said, “More Churchill books?” I plead guilty to being a Winston Churchill fanatic. I have read Churchill’s six-volume, two-million-word book The Second World War three times.
Besides being a tribute to the need for resiliency in facing the slings and arrows of misfortune, Churchill’s life offers all of us some useful lessons that can be applied to investing.
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Let’s run down just some of these potential investing lessons.
Investing Lesson #1: Aim High
When you put your hard-earned money at risk, you should aim high for big fat returns.
Churchill always aimed high no matter what obstacles lay in his way. This always meant taking risks that led to his greatest victories—as well as his most painful defeats.
In his youth seeking fame and glory, he threw himself into five conflicts around the world. His political career was a wild roller coaster ride but he always kept his eye on the top prize.
We will not likely match Churchill’s (or Warren Buffett’s) achievements but by aiming high we will always achieve something worthwhile.
Investing Lesson #2: There’s No Substitute for Hard Work
Churchill’s kingly lifestyle was bankrolled by churning out a stream of books and articles with steely discipline. He read widely and thought through his strategies much more than his critics give him credit for.
His maxim was to always put “a premium on effort” and a “penalty on inertia.”
Churchill benefitted greatly from writing late into the night (and early morning) after his champagne-soaked dinners.
In investing, you will not get far building your wealth without doing some independent research of your own.
Investing Lesson #3: Don’t Let Mistakes Get You Down
If success is going from one defeat to another without losing your enthusiasm, Churchill is its patron saint.
In one year, he lost his seat on the Conservative front bench over his stand on India, had his entire portfolio wiped out by a market crash and was nearly killed when he looked the wrong way and was hit by a car in New York.
But he had the courage to regain his footing and begin his remarkable comeback.
The market has a way of delivering punishing blows to our confidence and investment portfolios – especially lately. We all will make mistakes. Don’t throw in the towel and come back all the wiser with a renewed sense of opportunity.
Investing Lesson #4: Don’t Play the Blame Game
How many of us always find someone to blame when an investment does not pan out as expected. It’s that idiot investment newsletter editor, stupid financial advisor, or an incompetent executive that is to blame for our unfortunate investments.
Churchill never wasted his time with the blame game and simply moved on to the next speech or fight. Take ownership for your mistakes and move on.
Investing Lesson #5: Find Joy in Learning
Investing should not be a task to be endured but rather, like life, a journey to be enjoyed. Churchill lived a large life with many interests and hobbies. He became a pretty good bricklayer and an accomplished artist. Writing on a wide range of topics broadened both his perspective and built his impressive intellectual capital.
He was also a global traveler with a penchant for adventure and action. You should follow his example by reading about and, if possible, visiting interesting high growth countries around the globe (though maybe wait until after the coronavirus is contained).
Investing Lesson #6: Have a Global Perspective & Strategy
Churchill’s grasp of world geography and history was simply astounding. His big advantage was being at the center of the British Empire that at its height covered 40% of the globe.
No doubt that today he would be very interested in Asian and emerging markets that offer great opportunities as they play catch-up. You’ll also need to think globally and scour the world for growth and value.
This is the mission of my Cabot Explorer advisory.
Investing Lesson #7: Be Aggressive & Conservative
One of Churchill’s unusual traits was his ability to be conservative and aggressive at the right time.
As head of the Royal Navy while the storm clouds of the First World War gathered, Churchill was quite careful to position and protect Britain’s 1,100 warships.
But later, trying to end the carnage of trench warfare, Churchill attempted to knock Turkey out of the war and open a lifeline to Russia by seizing the Dardanelles, the gateway to Istanbul.
An investor following Churchill’s lead would need to have a mix of conservative and aggressive positions based on their age, risk tolerance and goals. It might even be useful to divide your portfolio into two buckets just to make sure you stay diversified and on track to reach your goals.
By following the example of Winston Churchill, you’ll make your life and investment journey successful and fun.
And if you need some help doing it, click here.
*This post has been updated from an original version.