Know Yourself & Your Style

October 10, 2022 8:02 am Information 0 Comment

Each investor is unique. Each investor is likely to have unique education, skills, experiences, personality, emotional intelligence, insights, risk-taking ability and even their personal and financial situations are likely to be unique. Hence, it would be foolish to blindly copy other investors or even compare against them. 

Get to know yourself, in terms of your abilities, skills, and area of expertise. Your unique skills and area of expertise give you a unique ability to understand certain businesses better than others. Eg: A person working in the R&D department of a pharmaceutical company is likely to understand pharmaceutical companies better than a musician working for a record label and vice versa. Know where your edge is, and know where your Achilles heel is. Know that it is okay to pass on companies and even sectors that are very hard for you to understand as an investor. 

Gauge your emotional intelligence or EQ (Emotional Quotient), because it might be one of the most important factors in determining your returns as an investor. Are you able to control your emotions or do emotions control you? Markets & stocks almost never move in a linear fashion. Ups & downs are a big part of it, just like a roller-coaster. Controlling one’s emotions at the extremes is very important to achieving good returns. Panic or FOMO (fear of missing out) buying almost always ends badly. Similarly, panic selling when markets are in decline can undo a lot of the good work that an investor has done over many years in terms of stock selection, portfolio building, diversification, etc. Learn to master your emotions, and if you cannot control your emotions, it might be better to consider investing in equities via ETFs (Exchange Traded Funds) &/or MFs (Mutual Funds).

The investing world is so vast that a lifetime may not be enough to master each and every aspect of it. So it is better to stick to what one understands and what has delivered results for them. An investor does not need to master all of the different approaches like value investing, growth investing, momentum investing, turnaround plays, cyclical plays, special situations, technical analysis, coffee can method, etc. An investor just needs to understand what suits him, what he is easily able to comprehend, what has delivered results for him in the past, and just keep on doing that again and again. This is enough to build wealth. So it is very important to understand your investment style, constantly develop it and have the courage to follow it.

An investor may start as a value investor and then slowly learn and adopt growth investing or any other strategy and so on. But if a new investor tries to learn all the styles (strategies) at once and use them, he is more likely to feel confused and lost. So an investor would be well off to start slow with a style/strategy that suits him and slowly take it forward.

Remember, each investor is unique and so should their investment style be.

Below is a nice graphic version of the above information.

 

 

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Editor @ Thryvv
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Disclaimer: The information provided here is for information purposes only. It should not be taken as investment advice. Please consult your investment advisor before making investment decisions.

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