Philosophy on Investing part 4

I have been looking at my past trades stretching back to the first very trade I have made since year 2007 which was the bull period. Back then, I always thought I am good stock picker whereby nearly all stocks I bought are multi baggers earning me 20-30 % return in a few months which leads me to have an illusion that everything is within my control. During that time, I also tend to perceive stocks will move as per my expectation, ie picking stocks which is fundamentally sound and buying them no matter how over valued they seem to be by coming up with a estimated price near the present as a support. Therefore whenever I have made a decision, I will find evidence to support it rather than finding ways to refute it. This might sound counter intuitive as the norm will be buying stocks based on evidence instead..

Eventually, when stocks tend to plunge a few basis point everyday, I will take it as a form of correction and cost average it as I believe that the value will revert back to the mean eventually. I was apparently suffering from gambler's fallacy then whereby I thought a stock will recover after a few days of consecutive big plunge when in fact, it's not. All these are said on hindsight but i hope I can improve my investment by acknowledging my mistakes soon and correct them.

Nevertheless, i never doubt value investing even though i am not a firm practitioner. I hope to improve this method where I can mix momentum and value together to avoid from incurring opportunity cost by holding on undervalued securities that languish a long time before recovering. Instead of bottoming fishing where a price can always go lower than my estimated price, why not wait for the price to raise a bit (momentum) before entering? Ideally, I would want to pick the highest momentum stocks with the cheapest valuation.. Possible? Downside is that by adopting this strategy, I will inevitably follow the fool game so an important thing is to exit when the expectation is different from the reality on a large scale.This is easier say than done and its something which I have yet to figure out


Firm fundamental investors will buy/hold a stock in an indefinite period and assumption is that large emphasis is placed on the stock fundamentals and not the price where it is perceived as noise but thinking from another perspective, a prolonged plunge in stock price will affect the fundamentals too isn't it.


I will share more thoughts on Soros reflexivity philosophy in the next post which I happened to come across a few days back. Also note that there might not be a link between my each of my posts as I am just trying to pen down whatever thoughts that came across my mind so I will like to apologize in advance if it cause any confusion.