I call them the deadly sins because in your investing or trading they can kill your capital AND your psychological capital – which is just as deadly.
So the second sin is to await ‘manna from heaven’. This simply means waiting for the sweet bread to fall to your lap without lifting a finger. You may say that is not you. Possibly but numerous investors do exactly that. They read a book, buy some software, attend a course and they think that is the answer to investing.
Well all of the above are great starts to surefooted investing but they are not enough in themselves. The next step is only achieved by tenacity. That may seem like hard work to many but it really isn’t. The hard work is only in the beginning and as you repeatedly study what you have learnt from your books, software and education I can assure you it does become easier.
I am reminded here of the old adage ‘the harder I work the luckier I get’. I can say this is my mantra not just in investing but in other pursuits in life.
I would like to introduce a concept of de-learning. I came across it many many years ago when I was at a management training course. I have come across it once only and that surprises me because it is a very simple but true idea.
It basically goes as follows. I will use the example of attending a course to illustrate. When we attend a course we go up a learning curve. If we continue to revise and practice we climb further up the learning – further and further – to perhaps a very high level if we really do follow through.
If we don’t follow through then the learning we spent money on in time dissipates – and yes even back to zero.
I can further illustrate my point on a chart for the All Ords:
click to enlarge
And I could take it a step further. A wave four pullback could be a time when we get just a little slack and the wave five can be a resurgence when we really put our shoulder to the wheel.
Investors tend to ease off the learning when the market does not go their way. Or anything else gets in their way or when they throw in the towel or when their discipline just goes out the window.
So to avoid falling into the trap of waiting for manna from heaven – learn, revise, relearn, over and over again and real rewards will come.
Enjoy the ride