Don’t invest in stocks if you think this way – 04/26/2023 – From Grain to Grain

Investing in stocks appeals to most investors because of the promise of higher returns. Technology has made investing in stocks something commonplace, but the simplicity hides the difficulty in doing what needs to be done. In this sense, behavioral biases emerge in investors. Those who do not correct these biases suffer losses. Today, I comment on one of these biases that I have observed more frequently.

For those under 30, the form of access to stock prices and trading from the past is almost unbelievable.

I remember that when I started investing in the stock market, I only had three ways to follow the quotes: call the broker and ask how the price was, look in the printed newspaper the next day or go to B3 itself, which was the Bovespa at that time.

Calling the broker more than once a day was a sure scolding if you weren’t going to trade. At a certain point, as I mentioned in a previous article, I was a frequent visitor to B3. However, in the beginning, the follow-up was only through the newspaper. Detail, I didn’t buy the newspaper, I stopped by the library at Unicamp, where I studied, to take that peek.

Some may believe that seeing the evolution of quotes in real time makes a lot of difference. Believe me, you make better decisions if you don’t have access to the frenetic oscillation within the day. Most of the time, this oscillation is just noise.

Even the daily fluctuation hides the real trend most of the time.

After all, what does investing in a stock represent?

For many, it’s the simple act of buying a code with a price, betting that price will go up. Many times the bet is based on minutes or even seconds.

Seriously, there are still people who believe that this is how you invest in stocks?

I will put it differently.

Consider that a friend asked you to be a partner in his industry. For example, imagine he owns a shoe factory. He said that you could invest R$10,000 in shares in the factory, but these shares are not traded on the stock exchange, because, for now, only you and he will have these shares.

Now I ask you: are you going to ask your friend every minute how much he would buy back the shares? Would you run down the street every hour screaming to find out if someone would pay you anything for your actions? Would you advertise in the newspaper classifieds to come out the next day and just try to find out if anyone makes an offer?

Put that way, the attitude of knowing the price often seems ridiculous. Do you agree?

What do you think would be most relevant:
1 – Knowing if someone passing by on the street would pay a higher price?
2 – Understand how shoe sales are going, how is the competition in the footwear industry, how is the budget of potential buyers, how is the offer of credit to give access to more people buying shoes and other indicators in this line?

It is clear that the right thing to do is to monitor the indicators as in question 2. Investing in stocks means becoming a partner in an enterprise.

Without a doubt buying at the right price is key and I’ll talk more about this in the future. However, following the share price in a short period of time is almost as relevant as following cars passing by on the street.

What you should keep track of is the investment, but not the price that others are screaming at. When I speak of investment, I am referring to the business in which you became a partner. Therefore, monitor the operational indicators of the industry in which the company you became a partner is inserted and of your own company.

Any decision you make in the future should be based on how the fundamentals of investing have evolved in relation to your expectations. If the fundamentals are evolving as expected, the price direction will converge to what was expected.

But that takes a lot more work than most do. After all, looking at the stock quotes screen is much simpler and easier.

However, looking at stock quotes will more often than not give you the wrong message of what you should be doing. Therefore, if you think that investing in stocks is restricted to following stock quotes, do not enter this market.

Michael Viriato is an investment advisor and founding partner of Investor House.

Talk directly to me via email.

Follow and like De Grão em Grão on social networks. Follow the investment lessons in Instagram.

Book: The Journey to Financial Independence

summary

Introduction
Understand how you will achieve your financial independence
Living on an income is the last step on the journey to financial independence
These are the biggest questions about the journey to independence

Part 1 Construction of the plan
Chapter 1 The first step in building the blueprint for financial independence
Chapter 2 How do you define the rate of return in your plan for independence?
Chapter 3 Find out what equity you need to achieve your financial independence
Chapter 4 On your journey to independence, don’t overlook the importance of this factor
Chapter 5 Understand the two ways I applied to increase my saving capacity
Chapter 6 If You Double This Factor, Your Equity Can Multiply Much More
Chapter 7 Connecting the dots to build your plan

Part 2 Assembling the portfolio to lead you to financial independence
Chapter 8 Before making any investment, define these two factors
Chapter 9 For your investments to beat the CDI, you need to make two choices; understand
Fixed Income
Chapter 10 You should not build an income portfolio if you want to reach equity to live on income
Chapter 11 Avoid these two common fixed income investor mistakes
Chapter 12 In fixed income, does it pay to invest in private credit in relation to public credit?
Chapter 13 Discover how to win the private fixed income premium, but with low risk
Chapter 14 This is the simplest way to plan your financial independence with fixed income
Chapter 15 With our interest rates, find out if it pays to invest in dollars
Variable income
Chapter 16 Taking a risk can accelerate your journey to financial independence
Chapter 17 What is multimarket funds and how did they come about?
Chapter 18 Understand how to select hedge funds
Chapter 19 Is Real Estate an Appropriate Investment for Achieving Financial Independence?
Chapter 20 Real estate funds are better investments than real estate, but most prefer the worst; understand
Chapter 21 These real estate funds are more like fixed income funds
Chapter 22 When selecting Real Estate Funds, be careful with this indicator
Chapter 23 Discover the five indicators that you cannot disregard in paper real estate funds
…
Chapter 26 Don’t Invest in Stocks If You Think This Way
…
Chapter 33
Chapter 34 When Should I Trade a Risky Investment That Is Not Performing?
Investment funds and Private Pension
Chapter 35 Find out when it pays to invest in mutual funds
Chapter 36 Understand the five steps to select investment funds
…
Chapter 37 Multimarket funds disappoint in the semester; what to do?

PRESENT LINK: Did you like this text? Subscriber can release five free hits of any link per day. Just click the blue F below.