I know what you’re thinking. How could George Costanza, possibly the single biggest loser to grace a television screen, teach anyone to be a better investor?
Seinfeld fans will remember the episode where George enters the Diner, sits down with Jerry and comes to the conclusion that everything he thought he had done right in his life has been wrong.
Jerry, in his usual mischievous fashion, suggests to George that if everything he has ever done is wrong, then the exact opposite must be right!
https://www.youtube.com/wathch?v=cKUvKE3bQlY
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Like George, all investors are prone to normal human emotions such as greed and fear.
When fear grips the market, such as the moment it became clear Donald Trump would be the next President, many investors immediately hit the panic button and sold. We now know the immediate share-price fall after Donald Trump’s win, lasted less than 24 hours before the market again headed higher.
You might be surprised to know Peter Lynch, one of the world’s best investors, agrees with George in his opposite approach, telling investors it is important to act in a manner opposite to what your “gut” is telling you to do.
Unfortunately fear is not the only emotion investors need to guard against. Greed is possibly an even more dangerous emotion.
Ask yourself how many times you’ve sold a company only to watch it continue to track higher?
Many readers will probably be shaking their heads and reciting the old saying “you can’t go broke taking a profit”. In fact taking small profits can lead to a slow decline in capital if accompanied with large losses.
To understand this, you need to remember a rising share price has no limit. It can rise 100, 200, or even 10,000% whereas a declining share price can only fall to zero.
Small companies are often neglected by investors because their share price are seen to be much more volatile. While that is true, investors need to ask themselves whether the fear of price movement is stopping them from investing in some high quality companies?
Do you have an opinion on how George Costanza could help your investing? I would love to hear it!
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Disclosure:
Please Note: None of the above should be considered investment advice. These are my own opinions based on a number of years market experience. Please do your own research and consult a qualified financial advisor if you wish to invest.
Massive Seinfeld fan & love the analogy. I’ve often thought that when something I’m doing doesn’t work then the logical conclusion is to invert it, do the opposite then it should yield positive results.
Bit disheartening though to think all your own instincts are wrong but?
Nice to meet another Seinfeld fan! Yes indeed, it can be very disheartening. I believe the psychology of investing is something very few investors seriously consider. I actually believe anyone can value a stock (just look at all of the valuation services on the net) but putting that into practice, when you are standing alone against a wall of sellers is no easy feat, especially when our DNA is hardwired to run with the screaming hoards not against them. 🙂
I’m learning more & more that the psychology/ behavioural analysis part of investing is close to 90% (for me anyway) of the total mental input I need to consider when it comes to investing. The valuing etc is actually the easy part – after all maths is maths hey? Better to be approximately right than precisely wrong.
Spot on. Investors who can control their emotions, are as you say 90% of the way to beating the market. Sounds so simple but is actually so very hard.
Thanks for the sensible ideas around investing. I am very glad to see such great info being shared freely.
Thanks everyone
I am still learning both the site and investing. I am very interested in technology and would like to learn from you all