Trust in your Methods

Something that I think a lot of us struggle in the amateur investor community is trusting ourselves fully. What I mean by that is as I look around the blogs, social media posts, etc. what I find more often than not are a lot of truly great ideas and research that is coming out from independent amateur investors that arrive at conclusions that are not necessarily in line with those of “whales”. This is a good thing, in my opinion, because we are playing significantly different games when it comes to growing and developing our portfolios. Institutional investors have huge accounts and guidelines that they must follow, set forth by fund regulations, that we as small investors do not. This is a key in pretty much every book that Peter Lynch has ever written. But why do we still fail to beat not only the market, but also the whales?

Trust issues…

What happens with myself, and not only myself I’m sure, is that it takes time to trust yourself and your method. I know what I do works, I’ve seen it time and time again, but there is always that nagging thought in the back of my head when I go against the grain. That is something that I need to get over. When you look at the best of the best, they invested a bit differently when they were younger, being less conservative with holdings and allowing themselves to dig deep into the portfolio pockets to continue to add companies that they believed were significantly undervalued. And you know what? It worked.

I am not saying that I need to take unnecessary risks, but if something is cheap, that I truly believe is significantly undervalued, then why am I dipping my toe in it only to keep around holdings that are modestly or even significantly overvalued? Because the whales are keeping it in their portfolio?

Look at Cathie Wood for a second. Now I’m not saying she is wrong, I don’t know the inner workings of her fund or the amount of information that she has that I do not, but eight months ago she was a genius and everyone was jumping to buy when she made even the smallest move on a company. Now she has been brought down to earth as PEs retreat, the market begins to shift, and value begins to come back into play. Again, I am not saying she is wrong, I am saying those that follow her blindly are the ones that do not seem wise.

Remember Peloton (PTON)? Everyone was touting the at home trade, looking at the system and recurring subscription revenue and how much it was going to change the world. I even got caught up in it and bought some at valuations that I knew didn’t align with my style of investing. Why? Because I doubted myself instead of staying true to what I believe will hand me returns. I have a Peloton bike, and believe me, I love it, but at an $100 price point per share (was higher than that) which equated to around a $30 Billion dollar market cap, where did I see my returns coming from? Now that it is back around $7 Billion dollars, it may be something to investigate, but why did I waste my time earlier?

Again, it was trusting myself while the market looked the other way.

Anyways, appreciate you all listening to the rant, but 2022 looks like it may finally be the year to turn a corner.
Until next time, happy investing!