Repetitive
decision making takes its toll on the decisions. The energy levels and time of
day when you make decisions also impact the quality of analysis. Researcher Jonathan
Levav analysed 1112 parole hearings assigned to 8 judges. The Judge's pace of
decision making was grueling with 6 minutes to make a decision.
The impact of the study is interesting for the investing world, the chance of
a parole being released was as high as 65% in the
mornings and after breaks and dropped to near zero at the end of the
day, when the will power and energy was sapped. He concluded that we revert to
default decision making when the process is repetitive and will power is low.
In the investing world, a person who is
regularly taking decision & analyzing the volume of information or
reversing his previous inferences will suffer the same behavioral obstacle.
Mind is a monkey whose priority keeps changing with times. A learned investor has
to chain the urge to change the opinion every once in a while. Give time for
businesses to perform once you have made a decision based on wise counsel.
The story on this Stock was
based on this principle. Avoid too many decisions or doubts. As you can
see form charts the stock did not give good returns for 3 years between 2011
and 2014. Since the decision basis to invest in the stock captured in the Blog written
5 years ago did not change, there was no need to revisit or make
new decision. In the period from 2014 to 2016 the stock gave
400% returns.
We tend to revisit the stocks that we hold if
they do not give paper returns in a few months if not week. We must resist this
temptation to look at the stock price and continue to look at the fundamentals
of the business. Lets move from being Stock investors to business investors.
By investing in such sound businesses, the risk
and downside is reduced, when you manage risk, it manages the returns.
