Good Investors Stay Humble

Here's a great lesson from Sun Tzu On Investing

GRANDIOSITY

Some psychologists point to a human behavioral concept called grandiosity, as the primary cause of bull markets and bubbles. Grandiosity is a very strong belief in one’s greatness, abilities, knowledge, or character. One of the earliest stories of the danger inherent in grandiosity is from the Greek myth of Daedalus. Daedalus had built a labyrinth for Minos, the King of Crete, and when it was finished he wanted to return to his home in Greece. Because Daedalus was a useful engineer, King Minos refused to allow him to leave Crete.

King Minos controlled the sea, so Daedalus and his son Icarus could think of no other escape route from the island of Crete except by air. Therefore Daedalus used his great engineering skills to fabricate wings for himself and his young son Icarus out of feathers and wax and gave the whole gentle curvature a shape like the wings of a bird. When the father and son were prepared for the escape, Daedalus warned Icarus: Keep at a moderate height, for if you fly too low the damp will clog your wings, and if too high the heat will melt them.

As the two took flight, farmers and shepherds on the hillsides watched them in amazement, believing they must be gods. Suddenly the young Icarus, exulting in his new-found ability to fly, soared upward toward the heavens. The sun’s increasing heat began to soften the wax that kept his feathers in place and Icarus plunged helplessly into the sea and drowned. Daedalus arrived safely in Sicily, where he built a temple to Apollo and hung up his wings as an offering to the god.

This Greek myth, as is common in ancient tales, has a dual lesson for us. First, the obvious danger involved when one is overcome with feelings of grandiosity. But also, the amazing accomplishments that are possible when such grandiosity is applied within the confines of rational ambitions and ideals. When investors are hot and feel they can pick nothing but winners, they tend to be overcome with grandiosity--invincible, brilliant, unable to make a mistake. They no longer feel the need to consider risks and insist on a rational margin of safety after careful evaluation within their disciplined strategy. At that point, you can almost smell their portfolio holdings melting into a ball of soft wax!

Hopefully there will be times when you feel brilliant for making some timely decisive investment moves that reward you quickly and significantly. Resist the tendency towards grandiosity. Sun Tzu-style investors control such foolish emotions, always rationally facing the fact that 40% of all investment decisions are likely to produce average or sub-average results. In other words, stay humble and you’ll stay financially healthy.

I would really agree that more often that not it is very costly to our pockets and to our souls when one is too arrogant in the market.

Knowledge is power and being confident in one's own method is extremely important but there is a very fine line between being confident and being arrogant.

When one is arrogant, naturally one feels that one is Ze Special One.

And Ze Special One is simply special. One that can pick one winner after another. And Ze Special One makes no mistake, yes? And Ze Special One needs not much of margin of safety for they are simply SPECIAL.

Hmm....but can Ze Special One be so dead sure in the share market?

Is it even possible?

Let's be honest with ourselves. Take a good look at what we are. Are we really blessed with super powers to be so-called Special One? One who could pick winners after winners all the time? If we could, we wouldn't even be lurking around in message boards, forums or blogs. Face it.. we are just ze normal ones. Sometimes we can get good winners and sometimes we will make mistakes.

By staying humble, we will at least have a chance to recognise and acknowledge a mistake, if and when we do make a mistake. And when we do, it's utmost imperial that we correct our mistake(s) immediately and not hope and pray for the market to correct our mistake(s) for life is never always that kind to all of us.
Now if one is arrogant, would one ever admit that perhaps one is wrong in their stock selection?

And since one is not wrong, obviously the danger is one would not even consider cutting loss on a wrongly reasoned investment!

And since one is not wrong, would one even consider selling even though the market is proving them wrong and the stock's tumbling prices is also proving them wrong?

See the danger in such thinking?

Me? I think it's always good to stay humble! I am just a normal bugger who can make mistakes! And when I do make the mistake(s), I will correct it ASAP!

I won't let the market make a fool out of me and me moolah!