Friday, November 27, 2009

Taking It Personally

As this site has grown in reach over the last several months, the amount of reader feedback I have received has accelerated. Unquestionably, the articles that generate the most feedback are those related to particular securities (as opposed to a general article on investor this one). However, while the majority of sites stick to writing about stocks on which they are bullish, I also tend to write about stocks in which I'm not interested, in order to discuss the reasons that add to an investment's risk or subtract from its return. As a result, I've been in a position to observe some interesting reader behaviour.

If someone does not own a stock, and they come across a positive article about it, it doesn't seem to bother them much. I can tell because I have never received hate mail over this! On the other hand, if someone does own a stock, and they come across a negative article about it, they seem to take it personally! This results in my receiving racial slurs, demands for public apologies, and threats that I will be reported to the SEC.

But for everyone who actually initiates a personal attack, there are likely many others who managed to overcome the strong emotional reaction that they felt. Nevertheless, their decision-making ability with respect to this particular security may still have become marred with an emotional bias. I must admit that when I read a negative article about a stock on which I am bullish, I too feel a twinge of anger at the author (though this tendency has definitely dissipated over time as I have gained more experience). By recognizing this tendency, however, investors can take conscious steps to force themselves to have an open mind and to objectively consider the author's points. By doing so, investors can avoid some of the psychological investor pitfalls we've discussed previously.

There are a vast number of factors, many of which are quite subjective, that go into a decision to purchase a particular stock. As such, it follows that even people with similar investment philosophies will disagree on whether a particular security makes for a good investment. And that's okay: investors who turn out to be correct about one particular security will not necessarily be right about others. In the meantime, we can't tell who's right; all an investor can do is try to learn and thereby improve his "batting average", as Warren Buffett likes to call it. Key to this is overcoming the personal feelings involved in objective discussions of relevant securities.


Anonymous said...

as long as you don't take it personally Barel, I've learned a ton from your blog and appreciate all your hard work!

Anonymous said...

Yes! Don't let the haters bring you down. Also I love the fact that you directly address things you are thinking about (such as this). Your general investment articles inspire less emotional response from me as well but they add a lot of value to your blog as well as to the overall mess of investing nonsense out there. Thanks.

Anonymous said...

hi saj ,
frankly speaking im quite furious that some people can be so narrow minded when it comes to 'their' stock picks that they are unwilling to even consider an honest contrary view! just goes to show how much faith they have in their views or for that matter how logically based their stock picks are , if strict rationale is followed u r actually doing them a favour if by ur observations cause the stock to drop further in price(i know theirs a grammar mistake in here, but my english is a bit screwed apologies) causing it to become even more undervalued! Talk bout sticking to ur own convictions!!! guess what ? looks freedom of speech is undervalued these days ! keep up the good work man,
ps i hope im not overstepping boundaries here but r u on facebook?
any ideas how to present my stock pick?(should i convert the figures into $ from rs ? should i convert crores into millions[10 million =1 crore] by the way is ur name saj or is it barel?)
awaiting ur response Rayhaan

Saj Karsan said...

Thanks, guys!

Rayhaan, I don't really use facebook much. Feel free to use whatever currency makes the most sense to whomever you expect to hear replies from about your picks.


Unknown said...

You put out a great site, the fact that you present both stocks that you would buy and those that you would pan helps in seeing how you think, for it is very difficult to avoid falling in love with a stock you have spent so much time studying.

As "Influence" by Cialdini points out, gamblers are more confident in their choices after they put money down because of the consistency requirement(you can't put your heart behind something you don't believe in!). It takes real practice to overcome this.

I looked at ORS bought some shares, then some debate on this site made me rethink, so I sold at a 20% gain and moved over to QXM which I felt was less risky(and is now up 30% on paper). Were it not for your site I would not have been forced to do that analysis