Page 39 - DIY Investor Magazine - Issue 26

‘ANOTHER THING THAT SAPS CONFIDENCE IS THE FINANCIAL SERVICES INDUSTRY GOES OUT OF ITS WAY TO MAKE INVESTING SEEM A BLACK ART’
makes money. The types of stocks they buy, the number they hold and their attitude to risk, fairly quickly indicate to me whether they are successful or not.
If they are new, I soon figure out if they are on the right path, or likely to be banging their head against a wall. Many are on the right track, talk a lot of sense and are holding and/or looking at precisely the kind of quality stocks that are likely to work
out well; often they have dabbled with stocks or funds for at least 10 years but had their main focus on demanding jobs or businesses and the usual family distractions.
I suspect other facets of their lives eat away at their confidence in their investments; perhaps more accurately, they do not build confidence because they don’t have time to monitor returns effectively and are not getting the positive feedback loops to clearly show they are doing well.
Investing more money on a regular basis may make calculations around returns more difficult (WD - if you use the XIRR function in Microsoft Excel that will work out returns where you regularly add or subtract more money to your portfolio).
Another thing that saps confidence is the financial services industry goes out of its way to make investing seem a black art and that us ‘mere mortals’ couldn’t possibly master the techniques and skills required. Nothing could be further from the truth. A manifestation of low confidence is when investors are not great at choosing their own stocks, requiring the ‘confirmation bias’ of someone in a magazine or tip-sheet making a recommendation to buy.
I am not complaining - even though I am not a tipster, and nobody should blindly copy what I buy or sell - I am pretty sure that my comments assist that confirmation bias and help investors make decisions regarding a particular stock.
This boosts my following on Twitter and increases traffic to my websites – I write the stuff so it is pleasing when people actually read it!
Lack of confidence can also lead people to retire later than they could; taking the step to retire is a big one and should never be rushed, but I am certain that many people work years longer than they need, to be ‘on the safe side’, at the cost of less years of freedom as we get older.
Legendary Investor Warren Buffett observes that as he gets older, each day he has left alive becomes marginally more valuable, so he only does what he chooses to do; he is into his 90s now I believe.
‘WE’RE NOT WORTHY...’
A related concept is ‘imposter syndrome’ whereby truly talented Investors underestimate how good they are compared to others; they do not lack the confidence to pick stocks and run their portfolio, but when they meet other very capable investors, they feel like they don’t fit in.
In my experience, investors who are immensely wealthy are never flashy, are always modest, friendly and easy to talk to - and happy to share their knowledge.
I am a big fan of MotoGP bike racing where a chap called Danilo Petrucci recently won his second victory after being
in the top class for several years; he didn’t come through the usual ‘feeder classes’ of Moto3 and Moto2 which probably prompted him to say in an interview ‘I didn’t feel like I was good enough to be here’ – classic imposter syndrome thinking, clearly he is.
I had a sizeable dose of imposter syndrome when I started the WD journey; I thought I was a half-decent investor, nothing special, (that’s not changed, I’m just a bit more wrinkly!) But that by focusing on education, it would be useful for other people, especially newbies. In truth you can find tips and recommendations everywhere, but very little useful and practical information on how to run a portfolio consistently over time, with real world experience.
I found that lots of extremely talented and experienced investors wanted to talk to me and realised that I was perhaps more talented than I had believed before; whether new or experienced, the more discussions I had, the more I appreciated my own level of knowledge and understanding.
The best way to learn something is to teach it to others, and doing WD has enabled me to practice this principle.
39 DIY Investor Magazine | Dec 2020