Negative message is part of investment, it’s one of my key learning in my investment career for nearly 30 years. I have found a very peculiar thing — Investors do not like negative message and are accustomed to hiding evil and promoting good.
Human nature
Of course, I understand that this is part of human nature. I once exchanged opinions with a senior financial publishing house executive, why there are few reports or cases discussing investment failures or lessons learned in the market for reference. This will be very valuable for investors to share experience; because all investors definitely will experience that since someone has walked this wrong road, they can learn a lesson from it and don’t have to walk the wrong road again (Buffett also made a similar statement, next paragraph).
This way, the chance of successful investment can be improved and the goal of getting rich can be achieved as soon as possible. She told me that they had done similar cases, but the sales were very poor. It can be seen that the investors were talking about one thing, but they were actually unwilling to listen to negative message. I nodded after listening.
Buffett once said: “When people tell me they’ve learned from experience, I tell them the trick is to learn from other people’s experience.” (from: Q&A session with Dartmouth MBA students) Personally, I have always believed that it is important to discuss investment failures or lessons. This article will discuss several topics among them.
Significant negative message is more important
To make a long story short, positive news from companies will certainly drive stock prices up. But everyone has forgotten that as soon as negative message about a company disclosed, the drop in its share price is much greater than the increase in positive news.
Failed investment experience
Most people will only publicize success and the best investment achievements, and will not disclose the experience of failure, especially the huge failure story (because others don’t want to hear it, of course). This is a pity, because studying your own failed investment cases is the most effective way to find your own weaknesses. No other method is more helpful to investors than exploring your own failed investment cases (see my another blog article “What information should investors take notes? Why?“). But this is human nature, and it is very difficult for ordinary people to admit their mistakes.
Peer influence
I wrote a blog article before, “Why the successful skills needed for stock investment is opposite of successful workplace skills?” This question is being discussed. Stock investment is one of the few professional activities, result might not prorate with more resources added, moreover will decrease. There are a lot of people and money, rich dads and money owners, and finding the help of a well-known financial management company is useless. Discussing with ordinary people, colleagues, relatives, friends, and family members, generally speaking, not only is not helpful, but it will negatively impacted──because the opinions of crowd are usually counter-indicators in the stock market.
Hold the same opinion as everyone, the best-case scenario is market performance, so it is better to buy the market ETF. Peers will not welcome negative message. The crows will not be popular, it is conceivable that the discussions between relatives and friends of the peers must be positive news. It is just a waste of time to warm up each other or be a cheerleader. At best, it is just passing the name card, and it will not help to enhance investment ability and return.
Touted Stocks
Most people are eager to get the stock code recommended by the media, celebrities, relatives and friends. They don’t know anything about this company. They only know the soaring forecasts and bright prospects of this brand. Will anyone provide a stock code that will fall sharply? I have never heard of it, at least no one would be interested. The touted stock chasers ignore the risks of buying popular brands, warnings of corporate profits and losses, short-term speculation, dangers of buying stocks at high points, and unfavorable news (please refer to another blog article “Investors who chase for touted stocks” ).
It’s okay to make money. If you lose, you might rush to who provide the stock code. Strange enough, how can you attribute to your own wisdom when you make money? The phenomenon I described is so similar to buying a lottery, yes, you guessed right.
Two examples
I take two personal experiences that I have experienced here for your reference.
In year 2021, during an interview, the host asked me to express my opinion on two companies that have been extremely popular in recent years. Because I have done a lot of research on these two companies, I have given a piece of my personal opinion based on my own research experience – I am more optimistic about one of them, and not the other. People left a message after the interview, and the reaction was intense, and the language and wording were unbelievable.
All growth and tech stocks tumbled across the board in the first half of 2022, including semiconductors. Who would have thought that most of the well-known growth stocks would drop 70-90% before September 2021? It’s also impossible to believe that half of the Nasdaq composite stocks are down 40-50%, but it’s all true now. I wrote an article on my blog about the myths of semiconductor investment.
The content was kind enough to remind everyone. The article mentioned the stock that I was more optimistic about last year in the previous paragraph. As a result, readers have opinions on my words. I reply that what I said is the fact and I carefully read the part where the readers have opinions. I did not use the words as negative as they thought. On the contrary, I thought my meaning is positive.
Cherish your own broom
Such responses are, of course, inexplicable. I understand that this will disappoint a lot of people, because most people want to hear “good news or positive comments”; no one expects someone to dislike their holdings. For those who reacted violently and could not accept the facts, some viewers even caused irrational messages. I have only a few comments on this type of reflection:
- Anyone who expects me to have (and can only have) a positive view of all companies, stocks, issues, topics, cannot allow facts to be presented, or must agree with yours; I will disappoint you. Just like the comments of many friends with different opinions, as long as you don’t violate the two rules I set on the homepage of this blog, not to ask about individual stocks or personal tax issues. Even if I disagree, for a year, I have never deleted anyone’s comments –because we can’t expect the world to be the same.
- Don’t fall in love with stocks. You won’t stop a good performer from rising just because you’re biased against it; you won’t be able to gather energy to stop it from falling just because you prefer an underperformer. There is no such thing as “badmouthing” in the stock market. Emotionalism will not help you, it will only prove that you are not suitable for stock market investment.
- I quoted George Goodman in the postscript chapter of my book, “The Rules of Super Growth Stocks Investing”. In the words of , “The stock doesn’t know you own it. If you don’t know who you are, the stock market is an expensive place to find out. We human beings are a bunch of emotions, prejudices, and twitches and that makes it hard for us to understand the market. You will never know how it’s going to behave when. What is more important is how you’ll react when markets don’t react in your favor.”
- We are “investing”, not “voting.” If voting can replace investment research, then you can just spend money and put more resources. Successful investors know that stock investment research is one of the few things in the world where the result (remuneration) is inversely proportional to the manpower, money, and capital invested. One of the most obvious examples is stock fund managers. they gather all kinds of best resources; only 25% of them perform higher than the market’s return. Even the performance of stock fund managers are always poor than most retail investors (does this subvert your ideas?)
- Warren Buffett said: “You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right – that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.” In investment what makes you comfortable is rarely profitable; in order to maintain good investment performance, successful investors need some unconventional and willing to be different from crowd behaviors.
Bias never makes successful investors
If your holdings are furious just because someone publishes a different opinion from yours, or even a more unfavorable report; then you shouldn’t invest in the stock market at all, because you care too much about the opinions of others (yes, most people do. ). There is a high probability that you will run away from the stock market in the event of a crash, buy at the highest point when everyone is optimistic, chase touted stocks everywhere, and think that you are smarter than others in watching the wind direction.
Of course, it is impossible to hold stocks for a long time (because you will keep changing hands to buy the most popular stocks). In short, investors who cannot adhere to their own opinions or principles, without investment principles, will not be able to make a lot of money after all.
Conclusion
Buffett wrote in the 1995 Berkshire shareholder letter: “At Berkshire, we believe in Charlie’s dictum – “Just tell me the bad news; the good news will take care of itself” – and that is the behavior we expect of our managers when they are reporting to us.”
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Disclaimer
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