How to Be a Wise Investor

Lessons on investing from Alain de Botton.

How to Be a Wise Investor
Photo by David Karp 

The philosopher Alain de Botton often talks about the main elements of wisdom. I took each of them and turned them into a lesson that every investor must learn.

Realism

They are realistic about their investment returns. They don't expect to become a millionaire overnight.

Folly

All humans will often do dumb things. Do not underestimate your own ignorance or the ignorance of an analyst or investment firm. Even the top investment firms are often wrong. The wise investor relies on themself. They do their own asset analysis and do not rely too heavily on the opinions of others.

Self-acceptance

The wise investor understands the difference between who they are and who they want to be.

Resilience

They don't require much. They don't have lifestyle creep because they understand that their material possessions could be gone in an instant. They want to make money for fun and philanthropy because they know that more money will not make them happier.

Envy

“The wise don’t envy idly, realizing that there are some good reasons why they don’t have many of the things they really want. They look at the tycoon or the star and have a decent grasp of why they weren’t able to succeed at this level.”

Success and Failure

The wise investor is realistic about outcomes. They know that it is entirely possible for a terrible investor to get lucky and become rich. They are not fooled by randomness.

Pendulum

They know that there are pendulums in life. There will be good and bad times. The market will swing from green to red. You could be rich one day and poor the next.

Calm

They understand that there are pendulums in life and they are content with that. It creates calmness in their life. They are completely fine with not having money.