How come one of Churchill’s biggest political strengths led to success in communicating but NOT in investing? [Wednesdays: The Independent Investor]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
Happy mid-week, everyone!
Welcome to “The Independent Investor.”
Every Wednesday, we publish articles about great investment strategies and insights. Our goal is through these topics, we’ll help you achieve true financial freedom.
In this article, we’ll talk about an important factor that can make or break every investor’s portfolio or strategy.
Continue reading below to know one of the aspects that led to the investing downfall of this public speaking giant.
The Independent Investor
Winston Churchill was the former British Prime Minister in the 1940s and 1950s.
He is best remembered for successfully leading Britain through World War II, his inspiring speeches, and his refusal to give up and give in even when things were going badly.
In fact, many people consider Churchill as the “Greatest Briton of All Time”… and according to an article published by the British Broadcasting Corporation (BBC), he’s almost certainly the most famous British Prime Minister.
There’s another thing Churchill was good at:
He could stir emotions like no one else!
In the world of communicators, Churchill was a “Goliath”…
Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, often quotes Churchill whenever he teaches his students or employees about great public speaking.
After all, great leaders and speakers look up to some of the world’s public speaking giants, which, other than the former British Prime Minister, include:
- John F. Kennedy
- Martin Luther King Jr.
- Nelson Mandela
- Franklin Roosevelt
… and more.
Churchill: A Successful Communicator But An Ineffective Investor
Churchill has a way with words that could tug his audience’s emotions and fire up their adrenaline at the same time.
Professor Litman even half-joked that the “British Bulldog’s” words alone probably caused Nazi Leader Adolf Hitler to second-guess himself, and that might have played a part in the massive British and French evacuations in Dunkirk.
Simply said, Churchill’s speeches certainly helped strengthen the resolve of British troops.
Talk about strong emotional motivation! Clearly, the former British Prime Minister mastered the art of great speeches that called for great emotions and great actions.
… it’s just too bad he couldn’t control his own emotions as much as he could control others’.
As an investor, Churchill wasn’t part of what we call, “investing giants,” or the most successful investors in the world. In fact, one of his biggest political strengths—stirring up people’s emotions—turned out to be his investing downfall.
How did that happen?
He invested in “hot tips,” ranging from Colorado mining to Argentinian railways. Just imagine how little research about such stocks was available at that time! It’s quite hard to believe Churchill traded on more than a “gut feeling.”
Unsurprisingly, Churchill’s portfolio took a beating. He invested in American stocks just as the Great Depression was about to begin. He traded in the market highs of the late 1920s and lost terribly in the crash of 1929. He was actually known in the investing world for spending extravagantly with money he didn’t have.
The main lesson from Churchill’s investing story?
Intense emotions are necessary for motivating a country to defend itself against evil tyrants. However, those same emotions make for bad investing! Many of the world’s investing giants like Warren Buffett, Charlie Munger, Seth Klarman, and Jim Simons remind other investors of that regularly.
Great Investing Doesn’t—and Will NEVER—Require Emotions
According to Professor Litman, great investing ought to be devoid of all feelings.
Emotions drive various investing mistakes like the FOMO (fear of missing out), which can lead investors to make high-risk, poor-payout investments like Churchill did.
Additionally, emotional investing can also lead to panic selling. Sadly, that’s what’s currently happening with the markets in recent months.
Professor Litman says regular readers and wise investors know that U.S. equity fundamentals are strong. So, despite the panic caused by the mainstream media, these people take time to look into corporate income statements and balance sheets, which aren’t budging much.
The bottom line?
In the face of financial “noise,” remind yourself as an investor to buy low and sell high… NOT the other way around. Continue “dollar cost averaging” into the stock market, or investing a set amount of money at regular intervals regardless of how stocks are performing.
Doing these will help you control your emotions and maximize your investments even in times of stock market volatility.
Keep these tips in mind!
Always remember emotional behavior is the enemy of great decision making and investing. By keeping your emotions in check, you’ll stay rational through uncertain times… and as a result, your portfolio will thank you.
So, speak like Churchill, but invest like Buffett, Munger, Klarman, Simons, Templeton, and other investing greats!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
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“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
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To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
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