Saturday, 23 January 2016

Want to Be Successful at Stock Investing? Don’t Work in the Financial Industry!

Contrary to what you may find obvious, your chances of being successful at stock investing will actually diminish if you choose to work in the financial industry, especially if you begin your career there. This is because you will be so overwhelmed with the barrage of stock-investing “wisdom” that you may decide never to buy stocks, at least directly. Little of this wisdom is actually useful. 

With stock investing, there is just one rule you need: Ignore almost everything. The financial community tries really hard to make itself useful, but in this pursuit all it does is add to the unfathomable pandemonium. And while it adds to the preexisting intricacy, it also overlooks the simplest things. An analyst may care more about the internal rate of return (they call it IRR, yawn!) than what is obvious. He will take great pride in digging out some obscure aspect of some company rather than pick what is there in front of him. An analyst is someone who, when he sees a dog growling and ready to pounce at him, takes out his digital device and studies the data to find the probability of being bitten by an angry dog.

Those who start their careers in the financial sector will have their blank mental templates all written with traditional (and ineffective) rules of finance. Unless they challenge what they are learning free of cost with some “non-mainstream” stuff, they will eventually find themselves speaking the traditional language of finance. With traditional wisdom, you can’t expect great outcomes.

So, what’s the message? I am not saying that you leave your jobs at the financial industry. What I am saying is that your chances of success at stock investing will be better if you keep it simple and sensible. You don’t need the analyst. You don’t need the advisor. The fewer chefs you have the better your broth will be. For those who are already working in the financial industry, expose yourself to disconfirming and conflicting knowledge and wisdom. You will do well by challenging what you already know and adopting newer ways of thinking.   

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