Action needs to be taken after careful thought and consideration, but it needs to be taken only occasionally. A lot of you would deny it outrightly but read on to find why we say so...
At one level, one needs to have a list of investment-worthy stocks and be informed about all changes that are taking place in that list. And honestly, a lot of people are interested in just that. But knowing about the companies that are worthy of investments, and then monitoring these investments, is a full-fledged lifelong project, that demands dedication and research work overstretched periods.
And of course, all the equity investors out there would know this well. If you think of it, the problem is something else. It is not as if the investors invest their money and then forget about it completely. On the contrary, they end up monitoring their investments way too much; and that too, they always end up indulging in the wrong kinds of monitoring. Most stock investors would just stay glued to their television sets, and keep a track of the prices of their investments. And what is more, they focus not just on the price; but also on other bits of news and facts about the company, such as the markets, the overall sector, the economy as a whole; and, in fact, any and everything which the news anchors consider to be worthy of talking about.
Ignoring a lot of news…
What we just spoke about is not at all a healthy way to monitor stocks. In fact, not only is the practice unproductive, but also unhealthy. While knowledge and information are good, too much of it can be fatal. As much as you need to know about what to learn more, you also need to know what to ignore and not pay attention to.
We as humans have the inherent talent to see patterns everywhere, and form connections that don’t even exist in the first place. And the reason we are so obsessed with these patterns is not that we seek pleasure in observing them, but because we believe that they have some predictive value attached to them. And more often than not, such a habit is not going to help and is meant only for those who have an investment horizon of just a few months.
but knowing what is worth keeping tabs on!
Does this apply to every scenario that we are bound to witness? Should we not monitor our investments at all?
Not at all!
In the long run, health monitoring is the key to getting good returns on your investments. But bear in mind that actual action needs to take only when there is an actual need to do so. Neither can one randomly wake up from a deep slumber and decide to take action one fine day. Monitoring and analyzing stocks need to take place every day but in healthy limits. This will help you understand what potential names can be added to the list that we talked about above, and also about names that have made it to the list but might need second thoughts later on.
Also, remember that the real measure of how much investment activity has been done over some time is never how much action was taken during that period. A better alternative, instead, would be to evaluate over the years continuously and expand your knowledge and horizon.
If you can prevent wrong actions from taking place, you can end up doing as much good work as you could have if you had encouraged the right actions. And if you measure the volume of your work this way, you have done considerable amounts of work. Though it might sound strange, silence here is as rewarding and beneficial as speech is.
Of course, this does not translate to constant silence. It just means recommending only a limited set of actions. A lot of quiet and steady work that is done smartly and with consideration is the key to healthy investing. A few careful actions taken after thought and consideration will earn you way more than a lot of hurried and stupid decisions. And long term stability and returns are what we are all looking at.
So learn to develop the art of ignoring, but also of knowing what to ignore and what to act upon!