Could You Be Overthinking Your Investments?

When I first started investing, I read all the investing books I could find. I compiled all the strategies I learnt from the books and created a checklist of criteria to look at when analysing a company. I spent days going through the checklist, ensuring that a particular company passed all the tests suggested by the books I read.

Hi, my name is Stanley Lim, and I am a recovering overthinking-holic.

I’ve always assumed that investing encompasses the act of researching all the information possible, and working long calculations to tease out the value of a company. However, as I journeyed through Foolish investing, I realised that some Foolish investors were using less tedious methods of investing. I’ve even met some who would choose a company after going through only a quick mental calculation in their head. Yet, these investors still produce great results. In fact, even the famed investor Warren Buffett has picked some of his investments without the help of a computer or even a calculator.

A thought thus struck me. Am I thinking too much?

Performance Review

I went back and did a performance review on most of my investments, looking through the information I gathered and the reasons behind each investment. I realised that most of the information were not useful for my investment decision making. In fact, most of the conclusions I made about my investments can easily be deduced with the basic information available about the companies. I was spending unnecessary time, hunting for information that turned out to be unnecessary.

Foolish Takeaway

I feel that we should take our investments seriously, as seriously as we take our jobs. It is important to have a system for how one searches for and and analyses a company. I still think that reading investment books is a good way to learn more about investing. However, it is also important not to fall into the trap of over-thinking.

The information garnered from books or other sources should only be a guideline. One can create one’s own system of finding the perfect investment, but there isn’t a need to scour for every tiny detail about a company to make an informed decision. There certainly isn’t a need for a sophisticated excel spreadsheet to determine the value of a company. For more snippets and lessons on investing,  sign up here for  The Motley Fool’s weekly investing newsletter, Take Stock Singapore. Written by David Kuo, Take Stock Singapore will teach you how to GROW your wealth in the years ahead.  

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any company mentioned above