Sunday 14 June 2015

Are You Suffering From This Stock Picking Disease?

Over the past few days, I have been actively trying to refine my stocks selection techniques. As a perfectionist, I have a tough time doing it because I am just unsatisfied with the techniques/criteria that I have for stock picking.

Giving myself a break, I picked up the book "You Can Win" by Shiv Khera. In it, Shiv Khera talked about how some people have never made the decision to take a step forward in life because of their fears. They overthink their situation because they do not want to make a wrong decision. In the end, they end up where they are many years later. This is described by Shiv Khera as "paralysis by analysis".

After reading this book, it dawned upon me that there are times when we try our best to search for the 'perfect stock'. The stock that will appreciate in price, ten or twenty folds within the shortest period of time. As a result, we end up doing nothing for a prolonged period of time even though great investment opportunities presented itself to us countless times. However, take note of this, I am not advocating you to randomly buy stocks without analysing them. What I am trying to say is that many of us suffer from "paralysis by analysis".

We tend to over-analyse a stock because we are afraid of it trading so cheaply and because of this, we refuse to initiate a position for a long time. Then when the market price finally catches up with the value of the stock, we knock ourselves on the head for failing to buy the stock.

I feel that the best method for overcoming this hesitations that we have when initiating positions in a stock, is to have a framework/checklist for selecting stocks. A checklist will help us to understand ourselves better and the reasons for choosing the stock. Furthermore, it will also help us to take out some of the emotions in investing as it forces us to look at facts for the company.

I hope that this article will help to remind me to act, in the time of maximum pessimism when I am suffering from "paralysis by analysis", especially in the coming bear market which I have no idea when it will arrive.

The Journey To Financial Freedom,
SGInvestingSuccess  

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