One of the most common questions I get asked by people I meet in my workshops and through email is – “I have a passion in investing and would love to do it full-time. So how do I prepare to become a full-time investor?”
With the last few years of reasonably good performance from the overall stock market, and with more and more people flouting their multi-baggers on social media, it isn’t surprising to see many people wanting to quit their jobs to become full-time investors because they think they have a “knack for finding potential multi-baggers.”
I believe such thoughts are often masked by recency bias, because most of such questions about quitting a job to become a full-time investor usually follow good (recent) periods in the stock market.
Envy is also at work here, because a lot of people are witnessing some full-time investors (especially those popular on social media) get rich quick.
And then don’t forget the role of survivorship bias, which is a logical error of concentrating only on people or things that “survived” some process and inadvertently overlooking those that did not.
So, taking inspiration from other full-time investors who have made good money from “emerging moats” or “100-to-1 stocks” or “value trading” and ignoring others who followed similar processes but ended up with disasters can lead you to false conclusions about your own potential as a full-time investor.
What is more, like them, you don’t need to consider investing as a way to make you rich…but a way to keep you rich, that is, help you grow your purchasing power over time. Look at your work – job / profession / business – to make you rich and thus focus more energy there than on the stock market. That is another reason most of us should consider owning only high-quality businesses where we don’t have to spend a lot of time answering a lot of questions.
Anyways, to answer the question of how one can prepare to become a full-time investor, here is a checklist I have drawn for people who want to ignore my warnings and get into full time investing (though I have already written a detailed post on why you must not quit your job to become a full-time investor). In this checklist, especially note the consequences of getting it wrong.
[Click here to download large image]
Checklists save lives, in aviation and medicine, and also in tasks that involve a lot of biases and uncertainties…like investing.
I hope this checklist helps save some (financial) lives too. 🙂