If you want to ultimately be a loser – forecast, obtain as much information as you possibly can, meet with company management, hold positions for less than 12 months, listen to stories, and never question a crowd!
The market is highly efficient from an information perspective so don’t try to compete on information, you will never have an edge. Whilst the market may be efficient at assimilating information, participants are far from being rational in their actions in the market. Accordingly if you want to gain an edge in the market you need to concentrate on capitalizing on the natural short comings of investors.
In 2005 I came across this report which I found very interesting. This report highlighted exactly what you should not do from a behavioural perspective in order to stack the odds in your favour of outperforming the market. To be honest it was one of the top five reports that I have ever read from a brokerage house…..
Note the number one sin – forecasting! We try not to have any preconceived ideas and certainly don’t forecast…….we have no idea of what lies install for us. However we do know that markets move in broad trends and that there are underlying themes that drive the returns of asset prices. We also know that these underlying themes last for months and often years. Accordingly our energy is focused entirely on trying to identify these macro themes/drivers. Once you have identified these themes (which are not that hard to identify but hard to accept because of our natural reasoning) it is simply just a case of riding them for all they are worth. It is that simple.
watch the trend.
stay the course.
don’t be over confident.
Think I need more Practice/Patience!
Thank you, for both the advice and the reading material.