There must be 50 ways to make a record

You sit and think about how you can hit the scene […]

You need to find yourself as honest as can be […]

Now don’t get wrapped into the hype and what they think […]

There must be 50 ways to make a record …

A few weeks ago I listened to the debut mixtape of Kid Cudi: “A KiD Named KuDi” and one song stuck on my mind for the next couple of days. First because of the melody, later because of the lyrics. I started to realize how many parallels you are able to draw on investing.

You sit and think about how you can hit the scene […]

What especially stood out for me, personally, is how fittingly the song described my investment journey.

When I started to learn about investing I was fascinated and overwhelmed by the enormous number of available information. I remember thinking loads of hours about the right investment approach which fits my style and will, with a high probability, outperform the market.

The stock market doesn’t follow certain rules like science does.
One absolute term applies though: the law of supply and demand.

So I knew from the start you have to be different to beat the market. To put it in Kudis words:

Don’t get wrapped into the hype and what they think…

One prime example is the historical underperformance of large-cap stocks (if you combine it with factor investing or sort out “junk” companies) or top market cap stocks. Even though as a beginner it might feel counterintuitive, considering you are probably more attracted to invest in more well-known companies you daily encounter or companies that get media or analyst coverage. By the way, most of the time you shouldn’t listen to analysts or price targets anyway.

IMG_1206

One thing you should always know though is the reason why YOU invest. Listen to your own mind instead of listening to others. Even when no one sees certain opportunities as you do doesn’t mean your right or wrong. You must see the right answer for yourself.
Everyone got different perceptions about certain topics and so do you. So, in the end, it’s just you who can make the truly right decision.

There is one passage in the famous book “The Reminiscence of a Stock Operator” which reflects that perfectly:

“I kept my business to myself. It’ was a one-man business, anyhow. It was my head, wasn’t it? Prices either were going the way I doped them out, without any help from friends or partners, or they were going the other way, and nobody could stop them out of kindness to me. I couldn’t see where I needed to tell my business to anybody else. I’ve got friends, of course, but my business has always been the same a one-man affair. That is why I have always Played a lone hand.”

Another answer from legendary trader Marty Schwartz supports that opinion too :

“I tried to clone myself and it didn’t work. I taught them all my methodologies, but learning the intellectual side is only part of it. You can’t teach them your stomach.

You need to find yourself as honest as can be […]

If it is one thing I´ve learned from “Market Wizards” it´s that you should always cut losses quickly if the investment doesn’t perform as intended. But first, you have to set the rules for your investment. There are multiple questions you can ask yourself before making an investment but in my opinion, these are the most basic and important ones: Why you go into the trade, when and why you get out of it.

In this quote, Marty Schwartz explains how most investors let their emotions influence their investment decisions and how he became a (way) above average investor once he stopped irrational and emotional thinking:

“[Traders] would rather lose money than admit they’re wrong. What is the ultimate rationalization of a trader in a losing position? “I’ll get out when I’m even.” Why is getting out even so important? Because it protects the ego. I became a winning trader when I was able to say, “To hell with my ego, making money is more important.”

Personally, I avoid that problem by focusing on the numbers and historical results.

Another quote I like, about the mental aspect of investing, is from Dr. Van. K. Tharp:

“I’m not saying that controlling your mental state is the magic solution to trading success. It’s just part of the answer. But when you admit that the answer is within yourself, you’ve come a long way. The realization that you are responsible for the results you get is the key to successful investing. Winners know they are responsible for their results; losers think they are not.”

There must be 50 ways to make a record …

To sum it up: Whatever road you take in investing, there are plenty. Choose the strategy which fits your personal preference and always make sure you understand WHY you invest instead of solely listening to others. Additionally, you should be honest with yourself, rational and always open-minded. Maybe you are so open-minded to take investing lessons from a rap song…

“Everything that can be interpreted can also be misinterpreted” – Unkown

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s