Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life, written by William Green, a renowned financial journalist, offers many valuable insights into how the best investors in the world approach investing and life; and how they win at both.
The book is based on interviews with the world’s most successful investors, such as
Over the past quarter century, William Green has interviewed many of the world’s best investors, exploring what qualities, wisdom and insights have enabled them to achieve lasting success, and gathering everything in his book.
Because of its many valuable insights, the book Richer, Wiser, Happier is at the top of our list of the best investing books.
We have created a review of the book, adding our outlook on the few core ideas, in the hopes of convincing you to read the entire masterpiece. Whether you are new to investing, or an experienced investor, this book is definitely worth a read.
Table of contents
1. Make sure the odds are in your favor
Luck is defined as success or failure brought by chance rather than through one’s own actions. Since chance is involved, you can’t force luck, but you can definitely improve your odds at being lucky.
Some examples of improving your odds of success in life are:
building a wide professional network,
creating a strong personal brand,
acquiring new skills that are in high demand,
and being open-minded.
In a similar way, the book suggests making sure that the odds are in your favor when you invest your money. In investing (as in life), you must especially avoid playing “games” where the odds are against you.
There are many ways to win in life, but they all require some kind of an edge. In the same way, if you want to win at investing, you need an edge; a serious advantage over other investors.
Anyone who thinks investing is easy is foolish.
One type of advantage in investing is an informational advantage. You can get an informational edge by researching some stocks so deeply that you really understand why they have the potential to outperform the market.
That’s one of the core pieces of pieces of advice from the book that we deeply agree with: know what you’re investing in and know it in detail.
That also means investing is an activity that requires a lot of reading, thinking, and calculating. The more companies you analyze, the more ideas you get and the better your performance should be. Read our stock analysis guide to help you do this.
As you’ve probably heard, Warren Buffet, the most famous value investor, spends approximately 6 hours per day reading, reading, and reads around 500 pages.
When researching stocks, you are looking for investments with low risk and huge upside potential. Successful investing means, above all, waiting for those rare moments when the chances of making money outweigh the chances of losing.
And when the odds are in your favor, you should seize the opportunity. The bottom line is is: play games you can win.
Let’s say a few more words about luck, since the view in the book resonates with our experience. You should never underestimate the role of luck. It’s hard to beat being in the right place at the right time. It also be considered luck if you stumble upon an (investment) opportunity that fits your character and talents.
Nevertheless, you must be able to recognize a great opportunity, and you must also make sure that your skills match the opportunity you stumble upon. In other words, you must be able to recognize when you’re lucky and match your competences with the opportunity.
This means that personal development is a constant for the most successful investors. Thinking of yourself as lucky and seeing life as a game of chance can also help bring you fortune in life.
2. Learn to manage your emotions
At Equito, we’re big fans of stoic philosophy, which sets out principles for how to manage your emotions better.
The book Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life, emphasizes the need for managing your emotions properly as an investor in several different areas.
Money always arouses some kind of emotions. Successful investing is thus not only about understanding what you invest in and having an informational edge, but also about successfully managing your emotions.
As an investor, you cannot escape volatility, which means that the ups and downs in the markets can also lead to ups and downs in your emotional state. This not only leads to an unsettled mind, but also to you making unpredictable and incorrect investment decisions.
You should never get carried away when times are good or become too distressed when times are bad.
Some examples of emotional decisions in investing are:
Trading too frequently due to over-excitement.
Making emotional trading decisions based on the latest news and alerts.
Making the same decisions as crowds, especially going after overpriced assets.
Selling winning stocks too soon, and so on.
This leads us to the first lesson: never make decisions when you are emotional. If you are in an “emotional mode,” it is always advisable to first find ways to calm down.
The second lesson is that investing is so difficult that you will be wrong half the time, no matter how hard you work. That means you will lose money, which requires you to control your ego, emotions, and risk tolerance.
If we may add, you should also have a good risk management strategy in place as part of your investment strategy.
You need an investment strategy that works (and that is updated regularly, because no strategy works all the time), and you need to make sure that your emotions do not lead you astray.
That means your strategy needs to fit your risk, exposure, and loss tolerance. Never let yourself go too far in the wrong direction, either in investing or in life.
3. Focus yourself and know how to say No
One additional piece of advice from the book that struck a chord with us is not connected so much to investing as it is to living a successful life in general, and that’s about knowing how to say No to things.
The difference between successful and truly successful people, as stated in the book, is that the latter have learned to say No (to almost everything). It’s completely up to you to shape your life by deciding where you put your focus; and the things that will demand your focus tend to expand.
If you want to be successful in life (and investing), you must be very selective about what you spend your money, time, energy, and other resources on. Don’t over complicate your life unnecessarily.
Learn how to say no to almost everything.
In the same way, you should only work with people you like, admire, and can learn from. Those are usually the people who make you better as a person when you create and enrich a relationship with them.
As the final piece of advice from the book says (advice that is many times overlooked but is very important): be nice to people and always try to do the right thing.
This will lead to you having a wide network of people who will cheer you on and help you succeed. It’s an important message, and one that shows that you don’t have to be cold-hearted and brutal to be a successful investor.
Find something good, whether it is a business, a person, or a hobby, and stick with it.
4. Buy good businesses at bargain prices
Now let’s get to the core of the book, which is how to make money investing. The principles from the book are closely related to value-investing philosophy, which is also one of the best approaches to long-term investing.
As an investor, you want to find companies that are so cheap that it’s a no-brainer to buy them. This generally means that you should avoid all areas of investing that are dominated by short-term trends, sales hype, and high expectations.
Rather, you should take advantage of the market’s bipolar swings and buy stocks when they are trading at a large discount. The market as a whole is irrational, and falls from one extreme to the other.
It’s impossible to time the market, but you can acquire knowledge on how to recognize a good bargain.
The challenge here is that the best investment opportunities occur mainly in downturns when others are selling stocks (in a panic).
This means that you need to be able to wait several years or even a decade for companies on your watch list to reach a valuation that is considered a value investment (for example, a 30 percent discount from their intrinsic value).
As you might also conclude, most of the investors interviewed in the book are not day traders, but investors who very patiently wait for the right opportunity.
“My default position is to do nothing.” -Charlie Munger
No matter the business cycle, you should always spend enough time researching stocks to understand the company and what you are investing in. You should avoid companies with poor balance sheets, unethical management, or hot stocks with shiny prospectuses.
In addition, you should be extremely careful about market hype and investing with no margin of safety.
In this regard, investing is more about preservation than anything else, or as Warren Buffet said: never lose money. And you can lose money pretty quickly if you have no idea what you’re doing.
Here are four bullet points to always remember from the book:
Don’t pay too much for businesses you invest in.
Don’t invest in businesses that are fragile or overhyped.
Don’t invest with idiots.
Don’t invest in what you don’t understand.
Even though you should look for good companies at a cheap price and buy stocks when others are selling, you should not try to time the market.
In investing, it is already hard to do the right thing, and it is impossible to do the right thing at the right time. Likewise, you should not react to every impulse, every message, every alert, and every new data point.
You must learn to separate the noise from the important data that leads to you buying good companies at exceptional prices.
Find the one right thing and then commit to it long-term.
5. Frugality and patient wealth creation
Last but not least, achieving financial success in life is not only about making good investments. Financial independence does not just mean having and making a lot of money, but most importantly, spending less than you earn.
You should always live within your means. When your income increases, you should make sure to curb your lifestyle.
As we like to teach in our blog posts:
First maximize your earning potential.
Then learn how to save and keep as much money as possible.
Only then comes investing and building your financial independence according to the pyramid of wealth.
In the same way, you should be careful not to overextend yourself with your investments so that you are forced to sell them at bargain prices. You must always have enough reserves so that you are not forced to sell your stocks in a downturn.
In the markets and in life, it is extremely important that you survive the dips, as dips, accidents, and misfortune always happen. That’s probably one of the most important pieces of advice from the book, especially if you ever faced an economic downturn in your lifetime.
It is also beneficial if you are not impatient and, in a hurry, to get rich, as this will lead to you making more mistakes, making rush investment decisions, and risking too much.
You need a long-term perspective, and to follow an investment strategy of resilient wealth creation. Instead of focusing on short-term gains, you should work more on your antifragility (a term defined by Nicolas Taleb), making sure you are shock resistant and stay in the game in the long-term.
Some important wisdom from the book to always bear in mind is that as dips come, so do uptrends. The upside in investing many times presents itself as the population grows, the economy expands, and productivity increases.
Let’s hope it will stay this way for many decades to come. And do not forget about compound interest, which is critical for long-term wealth accumulation.
The final conclusion would be that successful investing is closely linked to character development. Patience, integrity, rationality, and serenity are values to strive for. And in the end, writing down all these wise thoughts is easy, but internalizing and following them is not.
For more wise insights, we encourage you to buy and read the book.
The book has 296 pages, is very well written and is one of the few investing books on the mindset of the World’s best investors; it’s absolutely worth adding to your bookshelf.