These are the lessons I learned in 2018 - http://musingzebra.com/15-lessons-in-2018/
- Experience may not be a good teacher
Most elderly who died in Hurricane Katrina dies not because of their health, but because of confidence and denial. They have survived several hurricanes over their lifetime, so they believe Hurricane Katrina is no exception. Experience can create a close attitude that prevents us from seeing things with a fresh pair of eyes when the underlying circumstances have changed. Hence it is critical to stay within your circle of competence. Have a good dose of humility by appreciating how much you don’t know. Always be skeptical about your own belief and beware of confirmation bias.
- What to buy is overrated
We value action over inaction. We don’t like to look stupid for missing out on an opportunity as a result of doing nothing. We also believe more actions (actively buying and selling) increase return. But don’t confuse movement with progress. Far more money has been lost buying into bad ideas than missing out on great opportunities. Avoiding losses is paramount to the preservation of capital, which is the precondition to compound return. Know what not to buy is more important than know what to buy. This is where you need better filters.
- Better filters, not more information
We don’t need more information, we need a better way to think, to have better filters. Filters separate the wheat from the chaff by isolating the signal from the noise so we can focus on those 1 or 2 variables that determine 80% of the outcome. My favorite filter is to ask yourself: Will this matter 20 years from now?
- Leave your ego outside the market
In the market, it is not about being right or wrong or defeat, it is about making decision. We often become reluctant to sell a losing position because we equate it as failure and incompetence. We personalize the market and let ego creeps into our decision-making process. And the easiest way to personalize the market is to have an opinion about everything. You become interested in defending your own opinion instead of making the right decision. You confused net-worth with self-worth. So always ask ‘What if I’m wrong?’
- ‘‘I don’t know’
No one likes to say ‘I don’t know’. It is a conversation killer. It makes one look stupid. But here are the benefits: You avoid personalizing the market because you don’t have an opinion on everything; it create open-mindedness—a chance to listen to the other side of a story; decision quality goes up because you don’t buy into bad ideas; it cultivate intellectual humility and willingness to learn; and you’ll treat your investment ideas as hypotheses that need to be tested instead of a trophy to be cherished.
Submitted January 02, 2019 at 05:09PM by dreamxite http://bit.ly/2AqFsd0
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