Thought this was an interesting read from a free newsletter I received this morning from stockscores.com
***Stockscores.com Commentary***
Kids really like stories. Many like to read them, most like to listen to them. Wonderful fantasies can grow out of stories, allowing kids to imagine themselves in fun and exciting places, doing fantastic things. Whether it is from a good book or the voice of a favorite grand parent who has seen it all, you can always capture a child's attention with a good story.
Adults like a good story too. They may grow out of cats with hats or adventures in Narnia, but many adults still love to hear a good story, and take hold of the fantasies that grow out of them. Some of the best stories told to adults are of fortunes to be made from the stock market. The story begins with an investment in a company's stock, and the happy ending has us cashing in the next Yahoo.
Research any company, and you will read or hear a good story. Stories of oil discoveries in far away lands, cures for incurable diseases, technologies that let us talk across the planet without wires, Internet stores that sell to millions; all good stories told by companies to a captive audience of investors.
I can almost guarantee that no company will tell you a horror story. Companies want you to invest in them, and so they hire masterful storytellers to weave a tale of excitement and intrigue that inevitably leads to fortunes for the cast of players who choose to buy a role.
Like those told to children, most of these adult stories are fantasies. Cats don't wear great big hats and new worlds do not hide behind the closet door. But it is harder for adults to know the difference between truth and fiction, or even whether it matters.
But if you look back to when you were a kid, you'll remember that the most memorable stories were the ones told when the time was right. A Christmas Carol does not have the same effect when told in July, and a story about another great on-line bookstore does not sound that great right now.
Successful investors have to be good at finding the stories that will have happy endings. To help, here are some things to keep in mind:
- The best stock storytellers usually have a vested interest in whether you buy the story. Whether it is a guy named BullMarket21 telling the story on a stock market message board or an acclaimed research analyst from a major Wall Street firm, most are looking to make money by telling you the story.
- Investors who get married to a story become emotionally involved and emotion crowds the judgement. Don't be a believer and don't get emotional about stocks.
- The market has to be ready to hear the story. If it has been told before, and the market knows the ending, there is a good chance the market won't take much of an interest in it again. Always assess whether the market is interested in the story the company is telling before you buy in.
- If scary things start to happen, chances are you are involved in a horror story. Pinch yourself and move on.
- There will always be another good story to come along, so don't join in to one after the plot climaxes; it is all down hill from there.
- Every public company and their shareholders will try to convince you that they have a good story. Most don't.
Remember that it is more painful to sell a loser stock than it is to close a bad book. Be careful what stories you listen to.
Enough Said |
