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Winston Churchill’s 7 Rules for Investing

Winston Churchill’s amazing life offers some useful lessons that can be applied to investing. Here are seven rules for investing we can learn from him.

Investing Lessons, rules, 101 Class Chalkboard

I am a Churchill nut. My office space is littered with Winston Churchill books, and I have read Churchill’s six-volume, two-million-word The Second World War three times.

The best biography of Winston Churchill is actually one of the shortest: Churchill by Paul Johnson. At the end of the book, Johnson lays out lessons from Churchill’s life that can also be applied to investing.

Below is my take on these rules for investing, which the Cabot Explorer tries to follow with the goal of adding more reward than risk to member portfolios.

Let’s run down just some of these potential investing lessons.


Winston Churchill’s Investing Rule #1: Aim High

When you put your hard-earned money at risk, you should aim high for big returns.

Churchill always aimed high no matter what obstacles lay in his way. This always meant taking risks that led to his greatest victories as well as his most painful defeats. In his youth seeking fame and glory, he threw himself into five conflicts around the world. His political career was a wild roller coaster ride but he always kept his eye on the top prize. We will not likely match Churchill’s (or Warren Buffett’s) achievements but by aiming high we will always achieve something worthwhile.

Winston Churchill’s Investing Rule #2: There’s No Substitute for Hard Work

Churchill’s kingly lifestyle was bankrolled by churning out a stream of books and articles with steely discipline. He read widely and thought through his strategies much more than his critics give him credit for. His maxim was to always put “a premium on effort” and a “penalty on inertia.”

Churchill also benefitted greatly from a team that provided time-consuming research so that he could hit the ground running as he wrote wee into the morning after his champagne-soaked dinners.

You will not get far in building your portfolio without doing some independent research of your own. It’s also a smart move to capture a stream of independent ideas and strategies from services like the Oxford Club.

Winston Churchill’s Investing Rule #3: Don’t Let Mistakes Get You Down

If success is going from one defeat to another without losing your enthusiasm, Churchill is its patron saint. In one year, 1931, he lost his seat on the Conservative front bench over his stand on India, had his entire portfolio wiped out by a market crash and was nearly killed when he looked the wrong way and was hit by a car in New York.

Churchill then had the courage to regain his footing and begin his comeback.

The market has a way of delivering punishing blows to our confidence and portfolios. We all will make mistakes. Don’t throw in the towel but come back all the wiser with a renewed sense of opportunity.

Winston Churchill’s Investing Rule #4: Don’t Play the Blame Game

How many of us always find someone to blame when an investment does not pan out as expected? It is that idiot newsletter editor, stupid financial advisor, or an incompetent executive that is to blame for our unfortunate investments.

Churchill never wasted his time with the blame game but merely moved on to the next speech or fight. Take ownership of your mistakes and move on.

Winston Churchill’s Investing Rule #5: Find Joy in Learning & Investing

Investing should not be a task to be endured but rather, like life, a journey to be enjoyed. Churchill lived a large life with many interests and hobbies. He became a pretty good bricklayer and an accomplished artist. Writing on a wide range of topics both broadened his perspective and built his impressive intellectual capital.

He was also a global traveler with a penchant for adventure and action. You should follow his example by reading about and, if possible, visiting interesting high-growth countries such as Malaysia or Vietnam.

Winston Churchill’s Investing Rule #6: Have a Global Perspective & Strategy

Churchill’s grasp of world geography and history was simply astounding. His big advantage was being at the center of the British Empire which at its height covered 40% of the globe. As a young man, he threw himself into five wars: Cuba, Sudan, Egypt, India and South Africa.

No doubt that today he would be very interested in frontier and emerging markets that offer great opportunities as they play catch-up. You also need to think globally in managing your portfolio and search worldwide for growth and value.

This is the mission of my Cabot Explorer advisory.

Winston Churchill’s Investing Rule #7: Be Aggressive & Conservative

One of Churchill’s unusual traits was his ability to be conservative and aggressive at the same time. As head of the Royal Navy, while the storm clouds of World War I gathered, Churchill was quite careful to position and protect its 1,100 warships. But trying to end the carnage of trench warfare, Churchill attempted to knock Turkey out of the war and open a lifeline to Russia by seizing the Dardanelles, the gateway to Istanbul.

This brings me to my best advice for times of high uncertainty and volatility.

Divide your investments into two portfolios. Put the bulk of your money into a well-diversified, rock-solid “core portfolio” with the goal of preserving capital. The rest goes into an aggressive high-risk/high-reward “explore portfolio.”

For the core, a combination of conservative stocks and ETFs makes sense.

For the explore, consider high-potential emerging market and international stocks, as well as some overlooked technology stocks.

And if you need some help doing it, click here.

What life lessons have you learned that you now apply to investing?


*This post is periodically updated to reflect market conditions.

Carl Delfeld is a member of the Cabot investment team, and chief analyst of Cabot Explorer.