Frustration, Persistance & Stubborness

More from Sun Tzu On Investing

Sun Tzu often warned his generals that it is adaptive strategy that win wars, not persistence.

Persistence can be a fine quality, but blindly, stubbornly and obstinately pushing ahead in the wrong direction is not going to make you more successful.

Your persistance must be rational.

Stubbornly holding onto losing stocks as their business fundamental decay, hoping they magically return to your purchase price is no way to ensure victory, in fact, it all but gurantees defeat.

When the evidence says sell, then sell. Be persistent in the application of your strategy, not in banging your head against the wall or burying it in the sand. Be open to accept new information, face facts and take action as necessary. Ignoring important business developments in your portfolio won't make them go away.

Selling a stock that no longer measures up, or one that was purchased without accurate or complete evaluation is not admitting a mistake or any cause for embarresment, it's just one more necessary, even essential step toward victory.

If the stock price rises after you sell, don't be frustrated - you made a rational decision, the best you could based on the information you had at the time - and over your investing lifetime this rational approach will win out.

You invest your time and your energy into every business analysis, so after a sell decision you need not write off the company forever. If the business prospects and fundamentals improve later, you can and should reconsider repurchasing. Each decision must be viewed independently from previous decisions. Selling as fundamental decay is essential, as it frees capital to be redeployed into another productive investment.

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Ahh... being frustrated when after we decide to sell the stock, the stock decides to move up!

In the stock market, haven't we witnessed that sometimes after thorough reasoning, we come to the conclusion that the certain stock is not worth to be invested in anymore. And the minute we execute our SELL decision(s), the stock miraculously rises!

Err... so what gives?

Yes, being frustrated is understandable but what else can be done? Nothing more! I repeat nothing more! The point is, in the stock market sometimes this kind of stuff does happen, and it could happen again in the future. All can we can do is say 'Que Sera Sera'!

For me, there is no way I could tell whether a stock is gonna go up or down. It is mere impossible for me to figure out which way the stock is really going to go. Haven't we seen them bad to the bone, them rotten stocks, them almost bankrupt stocks, go up via cosmic movements? It does happen but for me, trying to catch which and when these rotten stocks will go up is the equivalent of buying a lottery ticket. I simply cannot do it. Again, let me say out loud again, I am not saying that it cannot be done, all I am saying is that I realise I do have the abilities to play such a game.

And in my opinion, for the investor, the most important issue is making clear logical reasonings to invest in a stock or to stay invested or to cash out of a stock investment. That's the investors edge. Making commonsense investing decisions. That's all that matters. If we take this edge away from ourselves, what then will become of we? Does it make sense to try to play a game that we don't understand too well just so long as we can be a hero? Remember.. Without faith in his own judgement no man can go very far in this game! - - Lefevre

So what's our investment edge? The very basic of our edge is we buy a 'good' stock at a cheap price and we sell the investment when either we get a really 'good' price (ie some paying an insane price for our investment stake... but how could i call it insane since this will be a good thingy for me? :P) for our investment or if the investment makes no sense anymore - ie the stock used to be good, but due to for some reasons or another, there are clear signs that the stock won't be good no more! And obviously we also sell if and when we made an investment mistake, ie a wrong stock selection.

Remember the issue of making mistakes? Here's some words of advice yet again...

There is no shame in making a mistake. Despite a great deal of research and analysis, I make plenty of them -- and so does every other investor -- because the future is inherently unpredictable. But there is shame in refusing to acknowledge a mistake and rectifying it. - - Warren Buffett

So if a stock goes up after we decided to sell (ie the stock investment makes no sense no more), what's there to be frustrated?

Should we continue to stick to our game plan and not get bothered? (see this blog posting: Developing an Investment Philosophy )

Or should we try to get the best possible price out of our mistakes? (Isn't this like HOPING for the market to correct our mistakes?? Does it make sense? Are we even that lucky all the time that the market will rectify our mistakes? What if that one mistake wipes us out of the game? How then?)

Lastly...

"persistence can be a fine quality, but blindly, stubbornly and obstinately pushing ahead in the wrong direction is not going to make you more successful"...

How very true!

Remember ... there is a verv, very fine line between being correct and being stubbornly wrong... hence it is most important that one's persistance must be rational!