The Top Ten (Part 10)

It’s a new year, and with that comes the inevitable resolutions. For 2011, I thought I would list my ten favorite resolutions for investors, from the bottom up.

Number ten is to check your ego at the door. The market doesn’t care about your ego. It doesn’t care who invented the internet. It doesn’t care whether your tie matches your shoes or not. The market is all about finding prices that balance buyers and sellers, and weighing the prospects for future returns. It has nothing to do with ego.

Of the many mistakes investors can make, hubris is one of the worst. Hubris comes up with an investment thesis and refuses to change it when circumstances change. Hubris insists that the buggy whip is coming back. Hubris demands that the stock or bond price meet your expectations, rather than the market’s expectations.

Successful investing has this paradox at the core: while you need to care about the market, the market doesn’t care about you. It’s like a one-sided relationship where one side is all take, take, take. Only, the market doesn’t just take. It gives financial return. It just doesn’t care who it gives it to.

If you don’t check your ego at the door you’re likely to make all kinds of mental errors. But the most common one is this: holding onto a position too long, unchanged and over-weighted. That stock doesn’t know you own it. By waiting too long, you add risk to your portfolio that, over time, doesn’t add to return.

There’s a saying that if you haven’t been humbled by the market, stick around. The best investors know this.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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By | 2014-09-11T14:29:14+00:00 January 12th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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