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.