By David Schawel, CFA, Economic Musings
“The path of least resistance is the path of the loser.” – H.G. Wells
Wells' above quote could be applied to a multitude of things. For myself as an investment manager, the risk of falling prey to confirmation bias and shallow analysis can be dangerous. In the confirmation bias, people tend to favor/believe information that supports their current views & hypotheses.
Being intellectually honest about our thesis and rationale for investments is critical to success. How can we become better investors if our thought process isn't consistently challenged? Are we taking the path of least resistance in our analysis and analytical rigor? Here are a few signs to watch out for:
Obviously a well vetted idea doesn't guarantee success, however a lack of reasonable diligence is inexcusable. Making money is too difficult to lose it on stupid decisions. Take a look at your holdings today and ask yourself why you are still holding it? Does it still meet your original criteria?
Hey Cullen,
You’ve had some great stuff over the last few days. While I don’t always agree with what you say, I always consider and seek to come here regularly to offset my own confirmation bias and consider different angles.
Thanks!
Short and sweet! A+ to DS; and, A+ to CR too for the intelligence work:-)
Nicely done. I’d add one more sure road to disaster — riding with the herd. I write about the housing markets on this site and others. My next article will refer to a recent poll of 108 leading economists and analysts. All except one thinks that the housing market will turn around no later than the end of 2012. What a joke. When was the last time they were right? I’ve been saying for more than a year that there was no housing bottom in sight. I always check for signs that my thesis is wrong.
Submitted to Shmish – social news for finance. http://www.shmish.com
“What is the point of holding a stock that you don’t have high conviction in?”
Absolutely. That is my favorite.
And make sure that management also have the conviction and “there own money” in it also. Alway check insiders trading report, who is buying, who is selling especially the option granted and exercise and the dilution effect. Dilution buy management and Directors is how they legally dilute your equity as shareholders and get very rich at your expense.
http://www.insider-monitor.com/sale-reports/insider-stock-sales-20110727.html
How its done
http://www.insider-monitor.com/trader/cik1056836.html
As Cullen mention you learn by doing but before you jump in the water make sure there re no sharks.
actually, i’ve found the path of least resistance is often the best path.
and as far as investing, a long term investor should have a very mechanical aproach, that requires less thought, such as dollar cost averaging with asset allocation.
Notify me of follow-up comments via e-mail
© 2009 pragcap.com · Register for PC
By David Schawel, CFA, Economic Musings
“The path of least resistance is the path of the loser.” – H.G. Wells
Wells' above quote could be applied to a multitude of things. For myself as an investment manager, the risk of falling prey to confirmation bias and shallow analysis can be dangerous. In the confirmation bias, people tend to favor/believe information that supports their current views & hypotheses.
Being intellectually honest about our thesis and rationale for investments is critical to success. How can we become better investors if our thought process isn't consistently challenged? Are we taking the path of least resistance in our analysis and analytical rigor? Here are a few signs to watch out for:
Obviously a well vetted idea doesn't guarantee success, however a lack of reasonable diligence is inexcusable. Making money is too difficult to lose it on stupid decisions. Take a look at your holdings today and ask yourself why you are still holding it? Does it still meet your original criteria?
Hey Cullen,
You’ve had some great stuff over the last few days. While I don’t always agree with what you say, I always consider and seek to come here regularly to offset my own confirmation bias and consider different angles.
Thanks!
Short and sweet! A+ to DS; and, A+ to CR too for the intelligence work:-)
Nicely done. I’d add one more sure road to disaster — riding with the herd. I write about the housing markets on this site and others. My next article will refer to a recent poll of 108 leading economists and analysts. All except one thinks that the housing market will turn around no later than the end of 2012. What a joke. When was the last time they were right? I’ve been saying for more than a year that there was no housing bottom in sight. I always check for signs that my thesis is wrong.
Submitted to Shmish – social news for finance. http://www.shmish.com
“What is the point of holding a stock that you don’t have high conviction in?”
Absolutely. That is my favorite.
And make sure that management also have the conviction and “there own money” in it also. Alway check insiders trading report, who is buying, who is selling especially the option granted and exercise and the dilution effect. Dilution buy management and Directors is how they legally dilute your equity as shareholders and get very rich at your expense.
http://www.insider-monitor.com/sale-reports/insider-stock-sales-20110727.html
How its done
http://www.insider-monitor.com/trader/cik1056836.html
As Cullen mention you learn by doing but before you jump in the water make sure there re no sharks.
actually, i’ve found the path of least resistance is often the best path.
and as far as investing, a long term investor should have a very mechanical aproach, that requires less thought, such as dollar cost averaging with asset allocation.
Notify me of follow-up comments via e-mail
© 2009 pragcap.com · Register for PC
By David Schawel, CFA, Economic Musings
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