Diversification

Investment is really a scary thing. The world outside change so fast that one could not be possible to get all the information, so much so as a person as lazy and not very smart as me. What I normally do is just grab some information from news or the company announcement and link it with the annual reports and do some analysis and calculation, with the hope to outsmart the market.

Of course you need to know roughly the big picture of the world. But big picture is big picture, it is easier said than understand. To me, it is still just like me being a blind man get to know the shape of an elephant by touching the let say ear or leg of the elephant. When the stock go the way as I hope for, I will think that I get the big picture right. But when the stock go the other way round, i will think that I do not know some information and get the big picture wrong.

When something go wrong, first I will search for any new updated bad news that I miss out. If there is no bad news found by me, I will ignore and think it is just a short term market volatility, provided that it do not drop wildly out of my expectation. Once a stock I owned drop so much out of my expectation, you bet that I will get panic and revalue the stock very much lower. I sold at loss. You know, it bounced back later when somebody buyout the whole business at a very high price. That was the case of of my previous experience. The stock occupied quite a huge percentage of my portfolio causing huge volatility of my portfolio. I put a huge bet on a wrong tree that I never thought it can be a wrong tree. The lesson is to diversify.

I hope that people who happen to read my blog diversify your portfolio wisely. In that sense, it will act as many many blind men touching different part of the elephant. You will be able to define the big picture in a more accurate way. Bet on 1 single stock or 2 therefore is a very dangerous game and chances are very high that you will get it wrong.