Every investor has had a knee-jerk reaction and made a decision that, in hindsight, might have not have been the best move. It may have been the result of a rapid increase or decrease in the value of a particular stock, or based on incomplete information. These rash decisions are typically rooted in fear and can be wealth-killers over the long run.
On this episode of Fool Live that aired on Nov. 30, 2020, Fool.com contributors Danny Vena and Brian Withers discussed how knowing who you are as an investor can keep you from making costly mistakes.
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Brian Withers: Know yourself and invest that way. Danny do you have anything to share, I’m catching you cold here.
Danny Vena: It’s interesting that you brought that up because one of the things that I used to post on the boards all the time was the quote, “Investor know thyself.” Because I think it’s really important. Not everybody can be comfortable investing in high-risk, high-reward companies, which is an area where a lot of my investments are or at least they start out that way. I think it’s important for folks to be able to sleep at night.
Find an area of the market, find an investing style that they’re comfortable with. Like you said, whether it’s dividend, whether its growth, whether it’s value, whether it’s stocks that have been mispriced for one reason or another, I think folks that find an area that they’re comfortable with and develop a certain amount of expertise will be successful as investors and help them sleep at night.
I think it’s important, like you said, that it’s important to know who you are and invest that way.
One of the things that worked early on for me and made my life easier as an investor is the fact that I picked a couple of areas that I was interested in and that I wanted to become somewhat of an expert in. Those areas are the ones that primarily fill out my portfolio. I am invested in e-commerce, I am invested in software-as-a-service stocks, I’m invested in streaming video, I’m invested in telehealth. If you look at my portfolio, I’m just going to guess, but I would say probably 75% of my portfolio falls into those broad categories.
Whenever a stock makes a big move up or down, I’m comfortable sitting down and trying to figure out what has caused that move. In that way, I don’t have to make rash decisions.
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