As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

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Value Investing
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Saturday, 31 August 2019

The Laws of Investing


Read? The Laws of Investing

Law #11: The most persuasive evidence is what you want to be true and/or have experienced personally.

A good investor turns over many rocks in a quest to find something special. But special is subjective. What you think is amazing may bore me, and vice versa. The special things we discover usually aren’t like nuggets of gold, with a specific quantifiable market value. Special is in the eye of the beholder, and because of Law #10, the trick is getting others to eventually behold it. Take value stocks. They are loved by many and, by definition, hated by others. Your story vs. mine.

“Special” is defined by a story, and the undefeated Pulitzer Prize-winning storyteller inside your own head is always yourself. The story that sounds the best is typically:

What you want to be true. The incentives for being right in investing are so big that it’s hard to think clearly about your analysis without getting distracted by the potential rewards. Predict the right weather and you get to wear the right clothes. Predict the right investments and you get to retire on the beach. High stakes cause fuzzy thinking because they push you to desperately want something to be true even if it’s not.

What you’ve personally experienced. Familiarity is a doppelganger of accuracy in your brain. The two can be hard to tell apart. Stuff you’ve experienced personally is way more realistic than what you merely read about, and two equally smart investors with the same data can come to opposite conclusions, swayed only by the differences in their unique life experiences.


Evidence you don’t want to be true and haven’t experienced can be persuasive, of course. But the amount of reinforcement you get when you do, and have, is easy to underestimate.


Read more? Other Laws


2 comments:

  1. Hi Uncle8888,

    2 words --- confirmation bias, LOL!

    Human DNA has evolved to hate uncertainty & cognitive dissonance.

    This helped our ancestors to survive the wilds & form communities ... and also to survive today in corporate jungles, hoho!

    If I feel comfortable or happy buying a value investment, chances are that it is not a value investment LOL!!

    ReplyDelete

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