In most cases, the fewer the facts, the stronger the opinion.
Investors love sharing their thoughts, ideas and concerns with the world. A quick Google search for ‘which stocks to buy, hold, or sell’ delivers 130 000 000 results. Can you imagine the range of opinions within those results? There's bound to be a pile of conflicting views in that lot. One ‘professional’ would rate XYZ stock as a bargain, where the other will say sell it immediately. Having access to so much information at the click of a button makes it increasingly difficult to distinguish between good investing advice and pure noise.
Sin #2: Gluttony
Overindulging in opinions leads to poor investments
Blindly following the investment advice of others won’t result in the positive outcome you're expecting. Some investors have bad judgement. There's no 'one size fits all' type of investment strategy. Your situation, needs and objectives are unique. The level of risk you can tolerate depends on your income, age, savings and personality. What works perfectly for Bill, might not work for you because your situation differs.
Take the ‘less is more approach’ by identifying which channels of information are sound and trustworthy. But never follow their investment advice blindly. Always question other people’s methods and use the information they provide as a mere guideline for stocks to keep your eye on.
4 Ways to make unbiased, virtuous investments
1) Stick to the facts
Facts are objective. If you base your decisions on cold-hard, data-backed fact, you'll be making the best investments decisions for yourself.
2) Do the research
No matter what other’s say, always question their methods by doing your own research. Your investment strategy is tailored to your individual needs. Only pick stocks that will help reach your goals.
3) Learn how to read financial reports
You'll have a major advantage if you know how to interpret financial reports. Get familiar with income statements, balance sheets and cash flows. These financial reports will identify the strengths, weaknesses and potential of a specific company.
4) Subscribe to a stock picking and portfolio management tool
Using stock picking software can be highly advantageous to your investment strategy. Investment tools rely solely on numbers, not on subjective motivations. A stock picking tool, like STRIDE, identifies which stocks you should buy, hold or sell based on a complex blend of metrics, resulting in generous investment returns.
At the end of the day, talk is cheap, and results are valuable. Don’t expect to reap decent returns by relying on opinions. Separate fact from fiction and you’ll be considerably closer to achieving your financial goals.
In the previous week we discussed the first deadly sin of investing, lust. Read it here.