Saturday, December 6, 2014

In Investing, It is Not As Simple As Applying Common Sense

Common Sense
This post is inspired by an article by Goh Eng Yeow (article title : In Investing, Use Common Sense) in Sunday Times last week. Ya, practicing common sense is useful and convenient advice when come to anything (i.e. not restricted to investing).

"Buy Low ; Sell High"

"Invest In Company With Share Price Below Their Intrinsic Value" (for Value Investors)

"Invest In Company With Strong Growth Forecast" (for Growth Investors)

"Invest and Hold and collect Dividend" (for Dividend Investors) 

These definitely are sure-win common sense right?

But the issue is, common sense is applicable to common scenarios, but in investing (or life, in general), we are constantly dealing with exceptional and un-common scenarios (which are mostly not within our control) and we need to response/react to them there and then. With varying experience and knowledge, the result/outcomes will vary too. Hence, there isn't a set of common sense rules applicable to such exceptional situation. 

Secondly, we are all unique individuals with different background, experience and knowledge. Thus, common sense to one person might not be a common sense to another. Just take an example of the simplest common sense : "Buy Low, Sell High" for illustration. What is low for Person A might be high for Person B, hence it is very subjective! Even if they both practice this same common sense principle, their result might be quite different!

In short, it is definitely not as simple as applying common sense when come to investing. What say you? (I know, many of you will say "it is common sense" right?) lol



  1. Hi Richard

    Those who applies the common sense rule of thumb will fall in the middle 80% of the distribution.

    Those who didn't apply common sense rule falls either the top 10% of each half.

    1. Hi B, it makes sense, I guess that's why most of us are called commoners ;-)

  2. We are not lack of investing knowledge but lack of actionable plans

  3. Hi Richard,

    For every common sense quote out there, there's one that will contradict it. The key is learning when to apply what. I put it on my blog's a few:

    1. Whatever will be will be OR life is what you made of it
    2. The best things in life are free OR pay peanuts to get monkeys

    I guess all of these investment truisms are's just when.

    1. LP : True!

      As long as we know when to question ourselves and not follow the common sense blindly! lol


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