Who do you prefer as a mentor – slightly biased yet an investor in stock or unbiased yet no risk taken of his own money?
Manshu of Onemint wrote an excellent post about who you should listen to. Being an online blogger and market trader I could very easily relate to most of his points but one point that stood out was
Stop listening to people with heavy biases.
The question is how do you judge if someone is heavily biased?
According to me there are two groups of people who talk about stocks. First those who themselves invest in stock and second those who don’t invest in stock but do the research for some clients.
If you listen to the person who has not invested in stock (assuming he is not restricted to invest in those stock by some corporate governance) but just tracks it for his clients would mean he himself is not confident about his own research. In short he could make more money selling his research rather investing with that research.
If you listen to person who has invested in a stock, he could be biased towards that stock.
In equity market, most people have bias towards stock they are holding and that is one of the main reason I don’t prefer sharing stocks I hold (to the extent I can and yet remain transparent with my trades) because then it could be taken the wrong way that I am pushing people to buy my stocks.
So finally my question is – Who do you prefer as a mentor – slightly biased yet investor in stock or unbiased yet no risk taken of his own money? Share your views in comments below.
Assalamualaykum….
good 1 bro, regarding biasing….
I believe, a person without any biases in his personal life, who does not generalize hastily, sees both sides of anything… is sure to have nice success in Equity market 😉
This is an important question, and I think people need to exercise their judgment to find the right answer.
While sometimes the answer seems fairly straightforward, it can get confusing at other times.
The thing that I look for most is if someone keeps harping the same thing over and over again. There are many perma bears in India and abroad and every time they open their mouth they are talking about a market crash. That’s great when the market eventually crashes, but you can’t invest with that kind of advice because you will always be either out of the market or you would be short.
I think if you hear Nassim Taleb – the author of the Black Swan – some of this is true for him. Every time there is a big crash, he’s on TV and talks about Black Swan events, and how they happen more often than we can predict, but he doesn’t talk about his two failed hedge funds. It seems to me that that’s his heavy bias. He is looking for Black Swans everywhere, and while it is an important concept, its also about all that he has to talk about, and if someone hears him for the first time without having all the other background info, they will end up making the wrong decision.
The same thing goes for Shankar Sharma as well Manshu. You will see him on TV always stating either how market should correct and when it actually corrects he says how it will correct more and bottom is yet very far from those levels and things like those. I am yet to see him thinking positive about the market.
Yes, that’s very true. I remember that about him too.