If you read market commentaries, you will know there are many trade suggestions that contradict each other.
For example, when there is a selloff, some investment advisors will encourage us to "buy the dip"; others will warn us not to "catch a falling knife".
When there is a rally, some fund managers will enthuse "the bull run still has legs" (whatever it means); others will caution this is a "dead cat bounce".
So who is right? Who is wrong? The answer is anybody's guess.
And honestly, you shouldn't care.
It is this potpourri of conflicting perspectives in the market that billions of dollars worth of shares change hands daily. [data] If everybody believes a stock is going to go one direction, nobody will be willing to take the other side of the trade.
Professional portfolio managers have learnt to take a stand - bullish or bearish, risk on or stay defensive at any point in time. Their PnL and their future career prospects depend on it.
As retail investors, we should have our own view too, be it right or wrong. When you are indecisive and always looking out to others for a lead, your mind will be like a reed in the wind - shaken by changing opinions, none of which is yours.
We ought to ignore the chatter and formulate our investment thesis based on logic and data. Here is what a savvy bottom up stock picker would do:
1. Retrieve the figures from company financial statements.
2. Derive the valuation ratios.
3. Compare result against history and peers in the same sector.
4. Decide on companies to invest.
5. Decide on price to buy and sell.
It may sound tedious, but it does not have to be manual. There are ready stock screeners out there that can perform the number crunching.
If even a screener sounds too scary for you, and you prefer to get stock recommendations directly, the least you can do is a fact check on other people's findings. Trust, but verify.
It is only through our own effort that we build up sufficient conviction on a company. It is only through our own analysis that we know for sure whether a stock is cheap or expensive at the current price.
When you have gone the mile to complete the homework, I'm sure you will feel more at ease when you put in the order. This is especially critical when everybody else seems to be heading for the exit.
Even when you invested and the stock price moves the other way, you will feel personally responsible, and not point the finger at others. Since the onus lies within you, you can take action and not be hapless.
You can review the information and see if you had missed out an important point. Is it an idiosyncratic company risk? Or is it broad market sentiment in general? If there was a mistake, you can learn from it. If there was none, you can stand firm in your belief. Either way, you are on track to becoming a better investor.
The money is yours. The financial freedom is yours. No one is obliged to realize your dream. Not your broker analyst; not your blogger next door.
Learn to invest with a view. Learn to lean into the wind. Face head-on towards volatility with confidence from your own research. It is a more comfortable position to be than being tossed around like a reed.
For example, when there is a selloff, some investment advisors will encourage us to "buy the dip"; others will warn us not to "catch a falling knife".
When there is a rally, some fund managers will enthuse "the bull run still has legs" (whatever it means); others will caution this is a "dead cat bounce".
So who is right? Who is wrong? The answer is anybody's guess.
And honestly, you shouldn't care.
It is this potpourri of conflicting perspectives in the market that billions of dollars worth of shares change hands daily. [data] If everybody believes a stock is going to go one direction, nobody will be willing to take the other side of the trade.
Professional portfolio managers have learnt to take a stand - bullish or bearish, risk on or stay defensive at any point in time. Their PnL and their future career prospects depend on it.
As retail investors, we should have our own view too, be it right or wrong. When you are indecisive and always looking out to others for a lead, your mind will be like a reed in the wind - shaken by changing opinions, none of which is yours.
 |
| Are you like a reed shaken in the everchanging wind? (Photo credit: Unsplash) |
We ought to ignore the chatter and formulate our investment thesis based on logic and data. Here is what a savvy bottom up stock picker would do:
1. Retrieve the figures from company financial statements.
2. Derive the valuation ratios.
3. Compare result against history and peers in the same sector.
4. Decide on companies to invest.
5. Decide on price to buy and sell.
It may sound tedious, but it does not have to be manual. There are ready stock screeners out there that can perform the number crunching.
If even a screener sounds too scary for you, and you prefer to get stock recommendations directly, the least you can do is a fact check on other people's findings. Trust, but verify.
It is only through our own effort that we build up sufficient conviction on a company. It is only through our own analysis that we know for sure whether a stock is cheap or expensive at the current price.
When you have gone the mile to complete the homework, I'm sure you will feel more at ease when you put in the order. This is especially critical when everybody else seems to be heading for the exit.
Even when you invested and the stock price moves the other way, you will feel personally responsible, and not point the finger at others. Since the onus lies within you, you can take action and not be hapless.
You can review the information and see if you had missed out an important point. Is it an idiosyncratic company risk? Or is it broad market sentiment in general? If there was a mistake, you can learn from it. If there was none, you can stand firm in your belief. Either way, you are on track to becoming a better investor.
The money is yours. The financial freedom is yours. No one is obliged to realize your dream. Not your broker analyst; not your blogger next door.
Learn to invest with a view. Learn to lean into the wind. Face head-on towards volatility with confidence from your own research. It is a more comfortable position to be than being tossed around like a reed.
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