Why conviction is everything

When I talk to people at parties or at the school gate about investing, most tell me they are risk averse. They say they instead know about property, and are more comfortable making large financial decisions in that space, as opposed to shares.

Most of the time, when I talk about managed funds, LICs or ETFs, people demonstrate they don't have that much knowledge about the vehicles investments are packaged in. They do however, have an understanding of listed stocks and the concept of owning individual companies.

While I tell them that I much prefer to invest with managers than pick my own stocks, I have started to experiment more with individual stock picking; mostly to get more experience with the emotional attachment to the decisions around individual shares rather than the managers.

One thing of interest I have noticed is my level of conviction. I find that if I hear other people who I respect talking about a stock, I am much more likely to have a strong conviction about it. I know, this is called confirmation bias, and I am willing to admit I suffer from it.

As an individual investor who does not do it for a living, I find it hard to have a strong view on a stock without the opinion of others. It's okay to admit that, because I know my strengths, and stock picking isn't one of them.

What I do admire however, is the conviction high quality investment managers have about stocks, when nobody is saying good things about them. The conversation we had with Graeme Shaw from Orbis Investments reflects just that. It was an extremely interesting interview, in which he makes a very strong case for why value investors need to stick to their guns.

Which reminds me again, to be a truly great investor, conviction matters. I am happy to admit that I follow the conviction of others, rather than relying on my own when it comes to stock picking. I suspect most Australians would feel the same way. Having experts like Orbis and our other Collective partners continue to create easy to understand educational content is vital for us to sustain the conversation about growing wealth over the long term for Australians.

Because even when your conviction on stocks is outsourced, your education needs to be ongoing to truly become a successful long-term investor who can make sound decisions about your overall wealth.

The fate of this nation, and Generation X, is counting on it.

Until next time,


The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.

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