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Controlling the noise
In the world of investing, there’s so much information to process and interpret that anybody can easily drown in it.
The challenge investors face lies in their ability to cut through the opaque and distorting bits and pieces of information, and get to the data that is truly relevant towards supporting an investment thesis.
Sometimes, there’s nothing relevant at all - only a jumble of datapoints that create talk and chatter.
Investors can easily dilute their efforts by chasing any number of seemingly plausible but really bad ideas, or becoming mired in meaningless detail.
Further, and in spite of their best efforts, they can also misinterpret signals and drift deeper into the information jungle.
So how do investors go about sensibly sorting through troves of information in the face of both emotional and psychological factors that can impede progress?
In essence, how do investors go about controlling the noise?
Fortunately, there are some things investors can do to improve their odds of success.
To start with, defining investing as a study of choice rather than chance helps.
When investors recognise the value of putting choice at the center, they can oftentimes control the inclination to gamble and take unnecessary chances in the hope that luck might shine their way.
As an aside, and perhaps one of the greatest paradoxes of investing, is that good choices do not always produce good results.
This is because in the short-run, good analysis can be overwhelmed by the strongest emotions pervasive in markets at any particular moment in time.
Thoughtful analysis however, improves the odds of success over time - the fundamental principle around which investing hinges.
Unprepared investors are highly vulnerable to being cast about like ragdolls when prices swing unpredictably, causing them to enter and exit markets at precisely the wrong time.
The beauty about investing really, is that it is every much an analytical pursuit as it is an emotional one.
Thus, controlling the noise at its core means stabilizing the mind so as to grasp the true essence of things and thus, separate opportunites from illusions.