Dividend Titan
Crossing the desert
williekeng
Publish date: Mon, 16 Jun 2025, 08:30 AM
I fell in love with Inner Mongolia.
It has more than its rich grasslands, wind turbines, beautiful horses. It also has pockets of vast deserts - For instance, the Gobi desert is one of the largest deserts in the world. This 1.3 million square km desert has very little rain, pressing heat and huge sand dunes that will tire your legs.
Last week, I rode across one of Inner Mongolia's other deserts.
As I bopped up and down on the camel's back holding my younger son's, I thought to myself: If I crash landed into the middle of the desert, what are the three most crucial things I need to have the highest chance of survival to cross the desert?
Well, I would need a GPS - Google or a Baidu Map. I needed water not food, since it's much easier to carry. And you can survive on water alone for days. Lastly, I would need a solar powered battery charger to keep my devices working.
Look, I'm not talking about fancy, good to have equipment. But the obvious stuff you need for survival.
The thing is, the desert is a brutal beast - sand kicking into your face, the scorching heat pressing down on you like a blanket. The stock market is just the same.
And what would make a successful investor for winning in the stock market?
Again, let's talk about the obvious stuff.
1. Know what makes a business a great investment
I find the most crucial thing in investing is to know what makes a business a great investment. And how to avoid the lousy ones. If you don't know how to tell a good business from a bad one in less than a minute, you have no business investing your life savings in the stock market.
For instance, if you can't tell whether this business is making real profits, and is highly leveraged, you're not ready to cross the desert.
Most investors don't know how to tell the difference.
2. Pick a strategy that will continue to make your money even when you’re wrong
Next, you need an investing strategy that will continue to make you money even when you get the big picture wrong. I admit, in the last 14 years, I have been wrong many times. I mean, who could tell an aggressive trade war break out this year? Who could tell the COVID-19 pandemic would have even happened? What’s more, Diligence members will know I occasionally get my calls wrong.
When stock market surprises hit you from the back, most investors would sell their stocks out of panic.
What matters most is you stay to your true north. Because the market is just as messy as crossing the desert.
This means you need to pick a solid strategy that will continue to make you money even when you get the big picture wrong.
Follow that strategy even when it feels scary.
And you don't want to go all in because of one stock recommendation, or one investment thesis.
3. Never chase quick wins
Lastly, never chase the quick wins. I remembered many years ago, I invested in a "beaten down" stock. Shares were down over 30%. I was cock-sure it would rebound in no time. So I borrowed money from my family and if I could just "time this right", I could make a quick win.
Little did I know the business was going through a tough time - lots of discounted products, creative director quitting and competition coming in. Profits were falling. I dug my head into the sand.
Instead of making a six-figure sum, I lost tens of thousands of dollars.
Quick wins are like the investment mirage of the desert. They look shiny on the surface. But it's just another sand dune waiting to swallow you.
So... These are what I believe every long-term investor needs to have to succeed:
- Know how to pick solid businesses
- Pick a good strategy that will continue to make you money even when you’re wrong about the big picture
- And never, ever chase the quick wins.
If you can stick to these ideas, I'm sure you're ready to cross the desert.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
The post Crossing the desert appeared first on Dividend Titan.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
