Slomo,

I wholeheartedly agree!

(after reading and listening widely, I often forget who to credit things to, so forgive me)

Knowing thyself is to invest in your circle of competence. The value multiplier comes from the understanding of a theme or sector, as well as the company itself. If you are "in the IT sector", then I see no issue with having a portfolio heavier on tech stocks, and seeking diversification and risk reduction in other ways. If you are employed in banking, or mining, the same goes - your innate knowledge will provide you insights others don't see and will only see by following. Once your nose points you to a company, then employ the drudgery of numbers, rules, measurements and sanity checks.

Knowing thyself is to know your triggers. If you are FOMO type of person, and you hear a great idea on the internet, or from a cabbie, or a 'rich' friend at a bbq, and your inner self just can't hold it and want to buy on your trading app in the instant, then perhaps read a book about controlling your urges, it will save you alot of carry forward losses.

Knowing thyself is to question your base assumptions. Does your age bracket provide you a different lens (or add a bias) to your analysis? Does your lifestyle do the same, provide a lens through which you cannot see the potential or can see the instant lack of value? Knowing thyself is to know your weaknesses. There are books on that too.

Knowing thyself is to have a set goal and a plan to reach that goal. The goal of the Frengi is too extreme I think, and to have an explicit upper limit on your portfolio total value or a goal yield provides a clear basis from which to anchor decisions. eg I want to generate $10k annually from a portfolio , therefore I need "x". This buy does not enable "x".

(I could go on and on) Finally Knowing thyself is to go your own way as the ad goes. Build your own models for testing companies. Of course stand on the shoulders of giants as you copy and paste bits from everyone, but build your own and like a founder of a company, you'll understand and leverage it the best!

Hi Slomo,

Investing psychology is a huge part of my strategy. Happy to discuss and share some thoughts on here.

Morgan is right, how you behave is as or more important than what you know.  A doctor for example has a more in-depth knowledge than anyone about the benefits of eating health or the consequences of smoking. However ever now and then you will meet an overweight doctor or one that smokes. 

I also agree that that psychology and behaviour it is ‘at least’ as important than the numbers. In something with a binary outcome like a bet all that matters are the numbers. For example, if I offer everyone on here a coin flip $110 for heads or $90 for tails near 100% will select heads because that’s what the smart money should do and the numbers are the only factor that are important. 

Investing is much more nuanced and where some smart people fall victim to their own intellect is when the evaluate and discovery the value in a stock and assume the rest of the market will see what they see.

Unlike the coin toss, a stock that has been identified as overvalued by the smart money may still be a good bet. Another group of smart people who have studied behavioural factors will have discovered you can also gain an edge exploiting momentum in the markets and that an overvalued stock can get much further over valued and as a result still be a good bet.

In the coin toss you have all the smart people on one side, in investing they can be both sides and what matters is understanding which side you are on in each case and behaving and executing the strategy that fits.