Stop Focusing And Start Investing
Creative Commons photo by Marfis 75
I was a reporter once. One thing I found interesting is that several people can witness the same incident–like an auto accident–and each individual has a different description of the incident.
Perspective plays a role. Attention is another factor. Even personal philosophy has a part in this phenomenon.
After reviewing a couple of financial articles over the weekend, I saw the same behavior as people described current economic conditions. One adviser was sure that the recession was caused by debt. Another said it was a result–totally–of real estate. Taxes caused it. Fed policy. Commodities prices. The list went on and on.
No one said it could be a result of several factors.
What does this tell us about investing?
It can mean the investors don’t approach the market holistically and, instead, filter information through their emotions and prejudice. It’s natural and completely human.
Unfortunately, the economy is a complex, but not random, system and it can’t be segmented. Lots of investors engage in a little wish fulfillment by noticing a couple trees and ignoring the forest that surrounds them.
Another problem this fixation causes is holding on to losing positions too long. You don’t want admit you’re wrong, so you keep doing the wrong thing, until it becomes right.
There are a couple things you can do:
- You can’t become fixated and let your prejudices run wild.
- You can look at the market as an interconnected totality, not little segments.
- You can use technology to fill in those gaps of knowledge.
- You can lose your fear of being wrong.
These are powerful tools to stop you when you feel you have moved from focus to fixation.
Related posts:
- Stop Being Frugal! Start Being Balanced
- Five Ways College Students Can Start Investing
- How To Start Your Own Hedge Fund
- Fear And Loathing In The Investing Singularity
- You Can’t Win for Losing: Why Money Management Matters
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is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
