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It's easy to fall into the trap of thinking that more experienced investors know better than you do, and perhaps they do sometimes.
But remember that you started investing with your own share of hard earned wisdom and common sense under your belt, and today's investment guru may not be tomorrow's.
The influence of others
The chances are that when you first came to investing, you set about learning how to invest and absorbed information and advice like a sponge, and rightly so, too. As investors, and in life, it's clearly a good idea that we never stop learning. But there is always the danger that if we listen to the opinions of others too much, we may end up making investment decisions that are more influenced by their thoughts and ideas than our own.
Temptation is all around. We may read someone's minutely detailed research about a company and assume that they must know their stuff. Perhaps the author has a successful investment track record, too, which could sway us further.
But before we buy shares in the company, we should stop and ask ourselves whether we would have even considered this investment opportunity if we hadn't just read the other investor's convincing text.
Dangerous gurus
It seems to me, that investors' fortunes can ebb and flow like the tide. Smart money today could be dumb money tomorrow, and you never know when it is going to reverse direction. So if you end up being tempted into following yesterday's guru into an investment that you may not otherwise have made, be prepared to fall flat on your face with him if it doesn't work out as expected!
The risk can extend across your entire investment strategy, too. For example, you may have initially come to investment with an instinct to take profits regularly. However, because of reading the convincing arguments of others, changed from being a buy-to-sell investor into a buy-and-hold-forever investor, against your own innate judgement. Or, perhaps you might have moved from searching for outstandingly good business models, to deep value hunting instead.
Whatever the influence, if you ever move away from your core beliefs and things go pear-shaped, perhaps then is the time to re-assess things to ensure that you are being true to your own convictions.
Using what you have
Ultimately, our supreme guide should always be our own thoughts and intuition, in my view. On the one hand, thinking with the conscious mind about investments can help us to formulate a logical and perhaps more quantitative analysis; on the other hand, the real kicker is our intuition, which is more likely to help us reach a qualitative judgement.
I like to think of intuition as the distillation of all that we have read, studied and experienced, being delivered to us via the sub-conscious mind. Meanwhile, according to Dr. David McDermott, who is one expert in decision-making theory, it may be described thus:
"So a practical answer to the question 'what is intuition?' would be to say that it's the ability to process information, not just information in the environment, but also information available internally from past experiences and knowledge, that allows you to make great decisions"
To me, this implies that when your gut is telling you something, you really should listen.
Active listening
Whilst being aware of the irony of advising people not to listen to advice too much, I would say that despite everything that you may learn on your investing journey, and the many opinions you will encounter, your best source of advice should always be yourself.
So learn everything you can, and consider the opinions of others, by all means; but when you are 'speaking', listen carefully -- and act on it!
BY
Kevin Godbold
http://www.fool.co.uk/news/investing/2010/09/27/listen-to-your-own-advice.aspx
But remember that you started investing with your own share of hard earned wisdom and common sense under your belt, and today's investment guru may not be tomorrow's.
The influence of others
The chances are that when you first came to investing, you set about learning how to invest and absorbed information and advice like a sponge, and rightly so, too. As investors, and in life, it's clearly a good idea that we never stop learning. But there is always the danger that if we listen to the opinions of others too much, we may end up making investment decisions that are more influenced by their thoughts and ideas than our own.
Temptation is all around. We may read someone's minutely detailed research about a company and assume that they must know their stuff. Perhaps the author has a successful investment track record, too, which could sway us further.
But before we buy shares in the company, we should stop and ask ourselves whether we would have even considered this investment opportunity if we hadn't just read the other investor's convincing text.
Dangerous gurus
It seems to me, that investors' fortunes can ebb and flow like the tide. Smart money today could be dumb money tomorrow, and you never know when it is going to reverse direction. So if you end up being tempted into following yesterday's guru into an investment that you may not otherwise have made, be prepared to fall flat on your face with him if it doesn't work out as expected!
The risk can extend across your entire investment strategy, too. For example, you may have initially come to investment with an instinct to take profits regularly. However, because of reading the convincing arguments of others, changed from being a buy-to-sell investor into a buy-and-hold-forever investor, against your own innate judgement. Or, perhaps you might have moved from searching for outstandingly good business models, to deep value hunting instead.
Whatever the influence, if you ever move away from your core beliefs and things go pear-shaped, perhaps then is the time to re-assess things to ensure that you are being true to your own convictions.
Using what you have
Ultimately, our supreme guide should always be our own thoughts and intuition, in my view. On the one hand, thinking with the conscious mind about investments can help us to formulate a logical and perhaps more quantitative analysis; on the other hand, the real kicker is our intuition, which is more likely to help us reach a qualitative judgement.
I like to think of intuition as the distillation of all that we have read, studied and experienced, being delivered to us via the sub-conscious mind. Meanwhile, according to Dr. David McDermott, who is one expert in decision-making theory, it may be described thus:
"So a practical answer to the question 'what is intuition?' would be to say that it's the ability to process information, not just information in the environment, but also information available internally from past experiences and knowledge, that allows you to make great decisions"
To me, this implies that when your gut is telling you something, you really should listen.
Active listening
Whilst being aware of the irony of advising people not to listen to advice too much, I would say that despite everything that you may learn on your investing journey, and the many opinions you will encounter, your best source of advice should always be yourself.
So learn everything you can, and consider the opinions of others, by all means; but when you are 'speaking', listen carefully -- and act on it!
BY
Kevin Godbold
http://www.fool.co.uk/news/investing/2010/09/27/listen-to-your-own-advice.aspx
