On the other hand, if you are a sales rep for a leading manufacturer and notice early adoptions in the field of new products, that can be an edge for picking stocks. Sometimes this can lead to discovery of potential stock investments. For example, a colleague of mine has considerable knowledge of adolescent epilepsy, and is quite current with the latest developments in the field, talking with physicians about new medications and potential breakthroughs for treating the disease. This may sound contradictory to the last paragraph, but here I simply mean know what areas of investing you are best at, and leverage those areas to the best of your ability when looking at companies. I gauge how successful a stock discussion is by how close I come to breaking up a first fight among the group. A value-based discussion always can benefit from the perspective of a growth minded stock picker, and so on. If you are right-brained, pursue a left-brained opinion. I like to pick people that are completely complementary in their skills. This is why we use the team approach to investing. This is a very dangerous suggestion for stock investing! You must be hyper-aware of your blind sides and incapacities. There are some pundits that advocate to be successful in a career, you should ignore you weaknesses. You want to have a plan of action if you get punched in the face. If you identify what can go wrong a priori rather than analyze the surprise a posteriori, you will be far more prepared to make tough decisions if your worst expectations are realized. They behave in an erratic pattern that hopefully trends upward over the long term. Most stocks don’t follow a straight path. If you enter into a new relationship with a stock, be prepared for the unexpected. But with that marriage proposal, please include the prenuptial agreement. I presume you want to marry the stock when you first decide to include it in your portfolio.
It’s a fine line between grit and stubbornness and it’s up to you to recognize the difference. That’s when rationality breaks down and the probability of losing money increases. Each of us has different thresholds for this, but once we cross over, decision making is no longer analytical. Be as truthful as you can about your risk tolerances, ability to be objective & analytical in uncertain conditions, and how you behave “in the clutch.” Every investor should be able to recognize when the heart overrides the brain. This includes shrinking yourself as well as making projections about the macro market participants. When it comes to investing, don’t think marching bands or synchronized swimming, think mountain climbing or solo swimming across the English Channel. Investing is different only in that you cannot see the collective groupthink, you can only see the results of their collective thought by the ways they drive individual stock prices. Trend following doesn’t end in middle school just take a look around any country club, cocktail party or parents at Saturday morning soccer games. The herd mentality is alive and well in every field. Most decisions made under duress are wrong. Even if bad news suddenly surfaces, studies have shown that it is almost always preferable to allow a quiet time-out period, gather your team, and carefully analyze the new information before you take any action. Do I constantly check my holdings during the day? Of course, but I’m totally aware of my own behavior and never place unnecessary emphasis on intra-day fluctuations.
The 24-hour news cycle, along with our natural biological tendency to “check on the nest” has driven us to extreme news-seeking behavior. You’ve probably noticed that the world expects daily breaking news updates on all your portfolio holdings. Regardless of your own psychological profile, this is becoming more difficult every year. As you read these, please take time to think about the mistakes you have made with past investments, and I’m certain in your post mortem you will be able to trace mistakes to one (or even worse-several) of the items on the list.
Here’s a short list of the important points to think about as you manage your money with a goal of building wealth.
0 kommentar(er)
