Do You Invest Like a Werewolf, Vampire, Mummy, Witch, or Zombie?
by by Peter Leeds
Read all the past Blog entries here
See if you can identify which strategy of these fiends is the most similar to your own. By recognizing your investing style, you'll know how much success to expect. In fact, by realizing which of these ghouls represents your own personal approach, you will be able to improve upon your results, and avoid all those spooky mistakes.
You get 'infected' by others, and mindlessly follow the crowd. Your idea of investing well is to buy what everyone else is buying, then you wonder why you end up walking around broke with all the others. You are also single-minded - while Zombies think only of eating brains, the Zombie investor thinks only of one or two industry groups. For example, your focus may solely be on biotech, or technology, or emerging markets... While such focus can sometimes be a good thing, the Zombie is basing their single-minded approach upon false beliefs, such as a particular industry group will be the key to riches.
How to Defeat a Zombie:
The surest way to go broke is to mindlessly follow the crowd. When you buy what everyone else is buying, you pay too much. When you sell while everyone else is selling, you unload your shares during a free-fall in price. Avoid single-minded focus based on subjective assumptions, and instead keep your mind open to all possibilities and investment groups. Meanwhile, remember that if you are investing in what everybody seems to be talking about, you are almost certainly paying way too much for the shares. Think for yourself!
You act on impulse, sometimes making ill-advised trades based on passion or greed. You chase 'hot stocks,' and continually go after the latest media darling investment (like pot stocks or Bitcoin-based companies, for example). You fall in love with a stock, and are willing to ride it all the way down to the bottom, long after the smart money jumped ship.
How to Break the Vampire Curse:
Well, crosses and holy water won't work this time. Actually, you can free yourself from the curse of investing like a Vampire by setting strict rules, and abiding by them - even when it hurts. For example, if you have a stop-loss on a stock which drops 10%, do not talk yourself out of sticking with the plan, or find justifications of why your should adjust the stop loss 'just a little bit lower.' Over time, setting your rules in stone and abiding by them will result in greater successes. And it will allow you to break free of your vampire-style-investing curse. Be warned, over time Vampires go broke.
If you trade like a Witch, then you believe your own bulls**t. Whether you think boiling newt eyes and bat wings will give you special powers, or reading the Wall Street Journal and other financial publications will help you become a great investor, you should rethink your assumptions. Considering that tens of millions of people read the popular stock market newspapers, why are the vast majority pretty sub-standard investors? As a trading Witch, you are also able to explain why you know what is going to happen with a stock, or the overall market, and even give some pretty good reasons. The fact that you are often wrong doesn't slow down your emotional arguments next time.
How to Melt a Witch:
Step one - admit what you don't know. Step two - understand that your one-point arguments for why a stock will rise or fall is vastly lacking. Yes, if oil prices go up for example, it makes it harder for airline companies. However, there are dozens of other factors at play which may lift the prices of that stock, none of 'Witch' were taken into account in your argument.
You may not realize it, but your decisions and trading activity are beyond your control. You get taken by fear and anxiety and greed, often reversing course on a stock prematurely, taking a loss instead of what would have eventually become a gain. You lose sleep over bad decisions and trades which are 'taking too long' to show a profit, especially during a full moon.
How to Cure a Werewolf:
Become systematic. Trade like a robot, rather than a frantic hunter. Often a Werewolf benefits from buying what they know be to an excellent quality company, then not checking the stock price overly frequently. In other words, make the trade, then give it time (as in months, not hours). Fire and forget (within reason).
Your investment style can be best described as ancient. You believe all those things you've heard about investing over the last decade or two, such as the market always goes up over time, or your should get 6% returns each year. The Mummy is exposed to opportunity costs, whereby they may miss out on significant gains due to their out-dated beliefs. Are IBM and GE and GM good investments? For your grandma, sure. But a Mummy doesn't get the chance to profit from Google and Alibaba and Tesla and NetFlix. Investing like it's yesterday, in yesterday's stocks, can result in your portfolio becoming a thing of the past.
How to Unwrap a Mummy:
Get with the times. Realize that tomorrow's winners will not necessarily be yesterday's winners. Open your mind to up and coming opportunities, rather than sinking into the false sense of safety in Kodak and Blockbuster and cigarettes and fur coat businesses, all of which destroyed their investors.
All of us have a part of each of these spooks in our own trading style. You can be mostly Zombie, but a little bit Werewolf and Vampire, for example. However, by identifying which trading style is MAINLY yours, you'll know what to work on to superpower your gains, and avoid the losses.
Of course, Werewolves don't know they are Werewolves. Zombies don't know they are Zombies. It helps to ask someone who knows you what their opinion of you would be. Send this article to a friend and ask them to tell you which trading Ghoul is most similar to your approach. You will almost certainly be surprised by their opinion. It may be quite different than you expected.
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