Stop learning from stock markets and you are dead in the water

We can all name a handful of investors who have made constant returns over the years which have made them extremely wealthy. These investors are often held in great esteem by private investors and many will follow their every word and their every stock purchase. To the untrained eye it can look as though these “experienced investors” have been there, done it and know everything about the stock market. However, time will show you that once you stop learning from stock markets you are literally dead in the water.

Reading the current environment

If we look at the last decade, since the US led mortgage crisis, we have experienced historically low interest rates around the world which have led to situations the likes of which have never been seen since the great depression. Experience will help to guide you in the longer term but ultimately nobody alive today has ever experienced anything quite like it. So, even those experienced investors who have been there, done it and bought the T-shirt, are still learning today.

Always take something out of each investment experience.
Stop learning from stock markets and you are dead in the water

Never fight the market

Once you begin to believe your own hype that you can effectively “beat the market” this is when you are at your most vulnerable. As we have mentioned on numerous occasions, if you consider the stock market (and all investment markets) to be nothing but information exchanges this will give you a greater understanding of the picture. We have our own opinions, other people have their views and inputting these views into the markets via share purchases and sales helps us to arrive at a consensus opinion. These things can change extremely quickly, as many of us will have seen in the past, but if your opinion is not shared by other investors in great numbers this should begin to sound alarm bells.

Cream will always rise to the top

One thing which has become obvious over the years is that ultimately the best companies will perform well and the cream will always rise to the top. It may take some time to get the ingredients right, the timing could be off but ultimately if the company keeps on performing well then this will eventually be reflected in the share price. In general markets are very good at valuing all types of companies but sometimes relatively small companies can go unnoticed. These are the potential gems of tomorrow and while they may be relatively high-risk in the early days if they continue to perform and build on their profits going forward they will ultimately be rewarded.

Swimming against the tide

On occasion over the years some prominent investors have attempted to “swim against the tide” when making calls on particular stocks or particular sectors. They can sometimes go against the market and if they are right the market will ultimately turn in their favour but if they are wrong they will end up swimming against the tide. This is extremely tiring and dangerous and can ultimately lead to significant losses. One example being the current US Trump led rally and the fact that many “expert analysts” failed to foresee this event and have been recommending clients hold back on investment. Markets can turn very quickly but there will become a point when you might need to admit defeat in your attempt to outguess the market.

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