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. 🙂
Hello Sir,
You are one of the few writers out there, who understand humans emotions and provide guidance to the world by describing the dangers and pitfalls in the investment world, and at the same time by providing the subtle nudge to do the right things.
Love your posts.
I think the idea of a full time investor is not a practical idea at all to begin with. Unless you intend to do short term trading involving heavy buying and selling, what will an amateur “full time investor” do the whole day? All you need is a handful of quality stocks to compound over a long time. Once you have them, there’s nothing “full time” about it. And where will you get capital to continue to research and buy new such stocks.