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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (6570)	4/3/1999 9:14:00 PM
From: Shane M	Read Replies (2) of 78652

Paul, Your comments remind me of the section in Dreman's book where studies show that increasing the amount of information increases one's confidence in a decision, but rarely increase the actual quality of a decision. The end result is that investors run the risk of becoming convinced that their decision is correct even though the market is telling them they're wrong (through a falling share price). This happened to me with Deswell Industries. I was locked in on a stock like DSWLF, bet big, and lost. The whole way down I couldn't believe the stock's price action up until the most recent quarterly report. What I learned: Never bet too big on one position ever again - or in other words force diversification upon my portfolio. To a lesser degree it has taught me to limit my averaging down activity. To be wrong is OK, but to persist in being wrong again and again by averaging down repeatedly doesn't sit well. Shane

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