Are You Making Your Investment Decision Based On Opinions or Facts?

Every now and then, whenever there is an interview with an “expert” on stock investment, people likes to seek for his recommendation. The “expert” will then give his suggestion according to his understanding of macro and micro environment and provide his buy or sell advice accordingly.

I must admit that these “experts” are doing a great job on providing their views according to certain logic. However, what worrying me the most is that most people will tend to accept the advice or tips unconditionally without any validation which might lead to a disastrous ending.

Nowadays, news and information could be obtained at no time and I can’t deny that unfavorable result will emerge should we not make our decision timely. Therefore, the justification of the information received is playing a very important role here. Isn’t it true that you will be more confident over the result to come if an investment decision is make according to your expertise on the subject matter? In other words, you are effectively eliminating unnecessary risks as a result of making the wrong decision. 
 

What I have been doing is, since I don’t know most of these “experts”and their “expertise”, treating this information as a reference. I will justify it before this information is finally being adopted into my decision making process. This requires continual learning, practice and justification. Action and experience will further enhance my ability on filtering out faulty information and making effective decision.

In my stock investment course, I teach my students on “how to fish but not feeding them”. That is why I don’t provide any stock recommendation even though I know my students are expecting me to do so. Any case study used is for educational and illustration purpose only. In particular, I emphasize on doing financial analysis based on their own facts finding but not recommendation by others. I show my students on where to look for required information and how to analyze a company’s financial condition according to their research findings. To make the learning more interactive and effective, I request my students to submit their analysis over the counters of their own choice and explain to me on the logic on their decision make. Yes, my students are demanded to do facts finding before any investment decision make instead of acting according to opinions.

After using my analytical processes, some of my students realize that some well-known blue chips counters are being filtered out. They start having doubts over their analysis and seeking for my advice. As a matter of fact, their analytical works are sound and making sense but they just lack of confident on their own analytical result and the decision seems like against the crowd. So, their concern is that, since these are famous, big & good companies, how could this happen? Yes, these companies may be famous and big. But, who says that these are good companies? Based on general impression? Based on what market says? Based on what the public says? How to validate this information from general impression, market and public? My message here is don't just listen and believe in these general information and opinions. Be yourself and do your analysis. Only your analysis could tell you what the truth is. 
 

To me, as long as the company fails in my evaluation process, I will kick them out, even the public claims that these are so-called big and good companies. Having strong belief in own analysis but not what others are talking about is the key to success in stock investment.

 

In short, do not invest blindly based on opinions but facts finding. There is no free lunch in this world. Therefore, do not expect others will share the truth with you especially when the information is given to you free. Only you could discover and reveal the facts by yourself by doing your homework. Trust yourself and be yourself. Keep learning and practicing will make you unique in the world of investment.