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This is so important...
At least it has been for me. I maintain a hand-written diary and I write down what I am thinking about a particular business. And the reason I chose that business is because I found something very impressive.
Could be great results. Could be evidence of strength in a weak industry environment. Could be anything really. So I wrote this down in the diary about what I am thinking right now. Why I am liking this business.
Then over the next few days I think about what am I missing? Why is the stock looking so cheap? Is there a structural defect I missed? Why should the long term trend of growth last? And so on.
In the last few weeks, for four businesses That I initially liked and was super excited about, for each of the four, I subsequently wrote a note titled “New concerns emerge in ...” and I decide to either park the idea for now or completely abandon it.
One of the most important traits to acquire in investing, I think, is to learn to force yourself to slow down. And it’s very very hard to do. The FOMO factor makes it hard.
It’s very hard to be willing to let go of what might turn out be a great investment idea that you missed because you took too long to finish your work and the price ran away. When it happens it hurts.
But the losses you will suffer when you buy something in a rush by giving into FOMO are far far more when that something turns out to be defective. That defect, which was ignored by the market in heady times, when FOMO is most prevelant, is not ignored by that market forever.
This has certainly been true for me. And I have been investing for 25 years now and gone through multiple market cycles. And it has taken me so long to finally slow down and let go of what might turn out to be a wonderful idea.
Maybe it’s to do with age. And maybe a few years from now, when I look back at the decisions I am making now, some of which will inevitably turn out to be mistakes, I will conclude that I was not slow enough... 😊
