For everyone else, however, beliefs about investing come in the form of passive knowledge. The tendency is simply to accumulate an inventory of conventional dictums. Investing beliefs are formed much the way a student prepares for a test. If the subject of investing were as simple as a third grade spelling bee, this wouldn’t be a problem.

But, investing is a far more complex subject. That isn’t to say it is necessarily a difficult subject. For some, it is relatively easy. But, it is never simple. An investor can not analyze relationships with the certitude and precision a physicist can. The investor is concerned with human phenomena, which are necessarily complex phenomena.

The complexity of the subject is what makes it appear so difficult. While you can develop a set of guiding principles, it is impossible to devise rules that will lead you to the best course of action in each and every case.

If you try to build an intellectual edifice based on principles such as high returns on equity, strong consumer franchises, low price-to-earnings ratios, low enterprise value-to-EBIT ratios, high free cash flow margins, and rock solid balance sheets – you will fail.

The entire structure will collapse, leaving the architect disillusioned. Why? Because the items listed above are desirable attributes – nothing more and nothing less. They are not true principles. Even as rules of thumb, they are badly flawed. Ultimately, investment decisions are not made about general classes; they are made about special cases.

Every investment decision requires good judgment and sound reasoning. You need to start with the correct principles. But, principles alone are not enough. You aren’t being asked what the law is, you’re being told to apply the law to the case before you.

This is where a lot of people start to feel overwhelmed. Having learned that investing is not simply a matter of running down a checklist, they don’t know where to begin.

The answer is to start with what you know best. Begin with your most strongly held beliefs. Subject them to honest scrutiny. Then, and only then, apply them to the case at hand.

Do you believe the concept of intrinsic value is a valid one? Do you believe it is a useful model? If so, then begin there. What does the concept of intrinsic value really mean? What conclusions follow from this belief?

In the case of intrinsic value, the most difficult conclusion you’ll have to grapple with is the idea that you can pay too much for a great business. For some, this is a relatively simple conflict to resolve. For whatever reason, they prefer cheap merchandise to quality merchandise.

For others, the conflict between intrinsic value and investing in great businesses is painfully difficult to resolve. But, if you are ever going to have confidence in your judgments, you have to be willing to submit your investment beliefs to honest scrutiny. You have to be your own prosecutor. You have to present the evidence against your thesis.

If you aren’t willing to do that, you’ll end up questioning the investment beliefs you do hold every time you underperform the market. Many proven investment techniques have lagged the market over short periods of time. Occasionally, the performance gap has been very wide. Regardless of whether you adopt a primarily qualitative or primarily quantitative approach to investing, this short-term underperformance is unavoidable.

It’s avoidable in the sense that a good investor can get lucky and not suffer a down year for a decade or so. Likewise, it’s possible to outperform an index year after year – if you’re lucky. But, it isn’t possible to adopt a strategy that guarantees such outperformance.

The best you can do is adopt a strategy that offers the right odds. A series of investment operations undertaken in accordance with such a strategy will not guarantee favorable outcomes in every case, but it should provide satisfactory results over the long-term.

There’s more than one way to skin a cat. I don’t want to encourage dogmatism. But, I do want to make sure you do not confuse that which is conventional with that which is reasonable. There is a lot of conventional, moderate sounding advice given to investors that does not hold up to careful scrutiny.

The most obvious example is diversification. Making a series of bets on separate high-probability events is an excellent idea. Diversifying across several different asset classes and hundreds of securities is something entirely different. Even if there are hundreds or thousands of excellent investment opportunities, it does not follow that an investor ought to make every reasonable bet. After all, some will appear to be more reasonable than others. There is no sense in taking on several difficult tasks in the hopes of achieving a result that can be produced by taking on a few very easy tasks.

You don’t have to agree with me on all these issues – most people don’t. But, it is vital that you question the unstated assumptions upon which an investment operation is based. You might come to the same conclusion as those who engage in wide diversification. But, you need to come to that conclusion on your own.

Many investors have not even bothered to consider the underlying premise of diversification. They aren’t really sure why diversification is a desirable strategy. They don’t know how it minimizes risk or at what point the benefit from adding an additional position becomes immaterial. Diversification may be a prudent strategy. But, you can only decide that for yourself after you’ve considered the benefits in terms of risk reduction and the detriments in terms of selectivity reduction.

If I were forced to spend my life betting on horse races, I’m quite certain I would bet on very few races. Whenever I did bet on a race, I’d bet on several different horses.

Why? Because I know more about people than I do about horses. The likelihood that a few horses in a few races get too much favorable attention seems much greater than the likelihood that I could ever make reasonably specific judgments as to which horse is most likely to win a given race. Of course, I would do best if I didn’t bet on any horse races at all.

So, the question is whether stocks are anything like horses. I don’t think they are. When it comes to businesses, I’m a lot more comfortable with the idea of picking the few winners from the many losers – especially when the odds get out of whack. The one tactic that would remain the same is inaction. Acting less and thinking more is sound advice wherever money or commitment is concerned.

A successful investor has to have confidence in his judgments. I don’t know how you can gain that confidence without subjecting your beliefs to honest scrutiny. An unexamined philosophy will never exorcise your deepest doubts – and for as long as these doubts remain, you will be unable to find the confidence you seek.

One of the most obvious signs of a lack of self-confidence is the inability to be able to look people in the eye for long periods when talking to them.  Eye contact reveals a lot about you including your honesty or hostility or your enthusiasm or disinterest.   If you can’t look people in the eye, you appear to be underconfident, people can think you are concealing something or that you are just not interested in them and what they are saying.

Anyone can improve their eye contact through practice.  The best place to start is with friends and family.  If you have children, notice how their attention increases if you read them a story with occasional eye contact as opposed to no eye contact. 

However, be careful not to develop an unrelenting stare since this sort of eye contact can conveys arrogance or hostility.  Better to try and aim for a balance between zero and constant eye contact.  This you can do by briefly alternating periods of eye-to-eye contact with shifting your gaze.

If you find yourself in a situation where you need to speak to more than one person at a time, you must remember to make contact and connect with each individual person in turn through separate eye contact.  Larger groups can be more tricky but by working your way through different parts of the audience with direct eye contact it’s amazing how much more attentive your audience will be and how much more respect and credibility you will gain.

Eyes can talk, smile and express all sorts of emotions so remember to use them to their best advantage.  A make-up lesson can add still further confidence.

The nature of all innovation is to enable people to do things faster, easier, and more convenient. Humans are by nature lazy. That’s not good or bad it’s just the way we are. Given the choice to do something the easy way or the hard way, it’s human nature to do it the easiest way. There are times however when this natural tendency works against your best interest. The fact that most people will take the easy route can also work in your favor, provided you don’t.

Here’s what I mean. Most people will take the short-term gain of avoiding the risk of trying something new and, by default, endure the long-term pain of underachieving in their life. Rather than risk the potential of failure they would rather not try in the first place.

A doctor endures over a decade of pain in attending medical school and interning in order to enjoy the long-term gain of a lifetime of prestige and wealth. A person endures the short-term pain of regular exercise and eating smart for the long-term gain of looking and feeling great. You can endure the short-term pain of saving money and paying off debt in order to enjoy the long-term gain of being financially secure in retirement.

The common strategy among 95% of the population is short-term gain for long-term pain. They stop trying after high school or college and accept their place in the rat race. This is self-doubt in action on a large scale.

Four important examples of short-term gain for long-term pain are:

Other people use money to build security for their families or a foundation for the poor. Money doesn’t care one way or the other. People who understand money save at least 10% of their income and invest it so it grows over time. They stay out of debt and pay their credit cards off monthly. People who understand interest collect it. Those who don’t, pay it. The short-term gain of buying something you don’t need results in the long-term pain of reaching retirement age and being dead or dead broke.

When we point the blame or make negative comments towards others, it has always been to my understanding that those statements say a lot about ourselves. Remember the saying “point the finger at someone and you’ll have three more pointing back at you”? This is really very true. It seems that when a person blames another for their shortcomings, they are really just pointing out those shortcomings that they can really relate to. Now, of course, this does not always apply. But, if a person is just saying something to bring the other person down, then the chances are pretty hefty that the one pointing the finger is pretty low on the self-esteem totem pole. Why would they even bother to point it out? To make themselves feel better? Does this really make a person with an inferiority complex feel more confident?

Confidence is obviously a tough thing to keep up in today’s world, it seems, with TV and all the media influence that has become a part of our daily existence. In many ways it is indeed causing many of us to feel more insecure about ourselves and accepting of others’ opinions of ourselves. Even if we LIKE that ‘socially undesired’ characteristic about ourselves, many will change just to appease and/or fit in with the crowd that is deemed by the society and culture we are surrounded by. This seems to me to be more of a survival instinct that we were born with early on in our human existence. And when something like that has lasted for this long, it obviously must take quite a while a tweak a bit. So, if we get one thing out of this article it would be this: remember that when you are publicly displaying any sort of remark, positive or negative, about another person; you are actually publicly making a bold statement about yourself. So, keep it positive, or at least proactive if you can. If you see a negative quality in a person, why not just try to be the constructive one who points out that positive thing about that person. The rewards are endless as we are always planting seeds with one another daily.

There are also some people who go through life with the oppressive feeling that no matter what they do, they will still fail. People with such thinking have lost confidence in their own abilities and believe that they have no control over their future. Instead of taking hold of new possibilities, and accepting life with all its uncertainties, they adapt to life out of sheer convenience. It is the inner voices in them that tells them the rewards in trying are not worth it, it is best to just give up.

Those who choose security above all else are those that are afraid of making mistakes or making any form of decisions. They stay well in their comfort zones and won’t take the risks. Successful people know that failures are not the end of anything but the beginning of something. For within every failure lie the seeds to success. Taking the necessary risk of a second attempt is what separates the leaders from followers. People who don’t try hard enough will always allow small failures to discourage them permanently. How sad.

Leaders in any fields know that real peace of mind come from within. The only safety net that you can truly rely on is your own self-confidence. True leaders know that courage comes from building on their own strengths to venture unto unknown paths and work decisively and confidently towards their goals. If you want to avoid losing this inner security, you must above all, learn to control negative thoughts. It’s true that bad luck seems to follow those who believe in their own bad luck.

To gain courage and energy, you should try to fix your goals clearly in you mind’s eye. Your imagination is the most powerful God-given tool that you can use. You must form an image of what you wish to achieve, and imagine the positive situation you will be in when you have achieved success. For instance, let’s say you want to get a job of your dreams and have secured an interview, you must imagine yourself as a strong, confident candidate. If your thoughts are filled with doubts, of your own previous failures, chances are, you will not be a confident person during the interview. Your lack of confidence will show in your body language and your speech. Seeing yourself as an ideal, indispensable candidate with enough experience for the job will move you forward in the direction of a successful candidate.

Or take another case, perhaps you’re a weak student and every thought of taking any tests or examinations will make you break out in cold sweat. You can learn new study skills, take up simple memory training and learn easy to master memory techniques to improve your memory and help you remember many things like mathematical formulas, historical dates or important scientific facts. You will find that you memory can perform astounding feats of memory recall and this will give you the added confidence in yourself. A calmer student invariably performs better in tests or examinations, all things being equal. This will show up as better grades and every success builds on itself.

Maybe you’re thinking of moving to a different part of the city. Imagine yourself in your new life, in your new home. Think about the colorful new neighborhood, and try to picture the nice people around you. You will find yourself looking forward to a new chapter in your life, a new beginning rich in promises. You have what it takes to make your own more fullfilling, it’s all in you, in your mind.

It isn’t enough just to accomplish things. That alone won’t make us feel confident. We have to recognize our accomplishments when we make them. If we think mostly about our failures and what we haven’t gotten done, we still won’t feel confident even if we have accomplished great things. If instead we feel proud about our accomplishments, share them with friends and family, and celebrate the larger ones, then it will help us to build better confidence.

When you try to accomplish and you don’t do everything you set out to do, do you recognize what you did get done or only that you failed to accomplish it all? Many of us feel disappointed in ourselves when we don’t do things perfectly or do everything, even when we have done wonderful things and made progress.

To help yourself have better confidence set goals for yourself regularly, set some goals that will require you to grow, and learn to acknowledge your progress and successes every day. To aid yourself in this, you might wish to keep a journal and write down in it the progress you make and the things you accomplish. You can also write on your calendar what you have gotten done or progress you have made with goals like losing weight, quitting smoking, or saving money.

Eliminate “can’t” from your vocabulary and replace it with asking yourself how you are going to do what you wish to do. Believe that there is a way to make progress with any goal you have. Use failures as lessons how to do things better, but don’t dwell on them. Just use them as an education. Failure only exists when you give up. Remember that any progress is progress.

Enjoy your accomplishments. Let yourself feel good about things you do and any progress or effort you make. You deserve it.