Monday, November 26, 2018

Investing Action Bias Can Be Detrimental To Your Strategy

I was having a short holiday trip with my family to KL in the past week so I did not particularly overlook the market too much other than quickly checking for news at night when my children has fallen asleep.

At times, I felt a bit guilty for ignoring my portfolio a little while I have some fun on the same side of the world.

Then I quickly reminded myself for why should it be that way.

While it is true that I literally did '' nothing'' to the portfolio, I reminded myself of the strategies I employed for the portfolio which has been working well for years.

My strategy to stick with a defensive dividend portfolio has been a boon bore for most of the days. It goes up a little and down a little in some days but they gradually move up after some years of convinced positioning.

Of course, I also opened a short position for UMS before I went to KL based on a couple of fundamental reasoning I have in my previous article and then I just leave it there for the thesis to work it out.

And then mostly I just leave it aside and wait for the events to play out.

I get on with my other side of life that I have.

Today's article is about how much action does an investor needs to have in order to feel justified that he or she considers certain aspects as trying to achieve.

Of course, it is common sense to everyone to know that most of the actions might not turn into desired results but many did not realise the behavioral aspects of trying to get involved with the herds.

Consider the recent events of First Reit which stole the limelight news in the past week for being the highly most volatile Reits jumping double digit day in and out.

Naturally, with such volatile event, it will be the town topic to talk to for many. Some may be fleeing for exit, while others may see it as an opportunity. Until today, we have not really received a proper explanation for causing such a train wreck other than some credit downgrade for the related associates.

The best action in this case is perhaps then to sit and do nothing until you've clearly visualize in your head the justification you need to buy/sell.

But most just wants to get a piece of the action for sake of "doing something"

This week, the big story is circulating the news about a manufacturing company Hi-P over a privatisation offer.

With such news circulating, it doesn't matter if fundamentals earnings or outlook are going to be good or bad, the share price would fly on such rumor.

Again, naturally it'll be the talk of the town and you'd be silly not to participate in such hot news right?

Does that even reminded you of the once great crypto currency which has now been quiet down quite a bit these days.

The more seasoned investors probably already know about this and are sticking to their strategies. The more experienced traders are probably having the last laugh of the day.

The newbies are most likely the lambs that get the slaughter.

Maybe, it's better for them to avoid the forum crowd, for many of the lions there are lurking, without knowing the consequences they have for "participating" in an action bias.

1 comment:

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