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Did You Spot The Gorilla In The Market?

Have you ever wondered how we, sometimes, manage to miss something that is sitting right under our noses?

It’s surprisingly easy to do, apparently.

It happened to me recently. And usually I consider myself to be quite observant.

Despite my vigilance, I still managed to miss a Peranakan restaurant on Telok Ayer Street. That is until someone alerted me to its existence.

It’s a street that I have walked down lots of times. So I am kicking myself for not finding it sooner.

Where’s the gorilla?

But now that I have found it, I doubt if I will ever miss the eatery again. The bee hoon with satay sauce is more than just very good. It’s quite outstanding.

Scientists have a name for the times when we miss something that is in plain sight. They have a name for everything, it seems.

They call it inattentional blindness. It happens when we fail to see things that are, perhaps, unexpected but, nevertheless, significant.

A famous experiment demonstrated the phenomenon …..

…. when a group of participants were asked if they noticed a gorilla walking across a basketball court, whilst they were tasked with counting the number of times the basketball was passed.

Over half the people didn’t spot the gorilla. They were so focussed on counting that they stopped noticing anything else.

Never stop monitoring

Something similar happens in investing.

There can be times when shares in our portfolios perform exceedingly well. They might even have done far better than we had originally expected.

That is great position to be in.

But it is important that we don’t become too attached to winners that we let smugness set in. We must never stop monitoring the story.

When we buy a stock we should try to fully understand the story behind the company. Confusing the price with the story is one of the biggest mistakes we can make.

But lots of investors still manage to fall foul of it.

Don’t be distracted

It is also important not to get distracted by the many things that are going on in the wider economy.

Nobody can predict interest rates. No one can predict the direction of the economy. And I have yet to find anyone who can correctly forecast the day-to-day movements of the stock market.

So dismiss those forecasts.

Forecasters are there to fill the airwaves with noise. They are unlikely to fill our pockets with money, though.

So, concentrate instead on what is actually happening at the companies that you are invested in. Forget about the din that is going on around you.

There is something else about inattentional blindness.

More eyes

We can sometimes become too fixated with the types of companies that we are interested in buying. Consequently, we overlook other opportunities in the market.

It happens all too often. It is also understandable because we, as private investors, don’t have boundless resources.

We only have one pair of eyes, which limits the number of companies that we can realistically study.

At Stock Advisor we have lots of eyes, looking at lots of companies at the same time. We believe that we have a greater chance of finding wonderful companies.

We also have more eyes to follow the performance of the companies that we have recommended and the shares that we might want to buy later on.

Pleasant surprises

Peter Lynch once said: “If we study 10 companies we might find one for which the story is better than expected. If we study 50, we might find five.”

We at Stock Advisor study lots of companies. We also discard many that we feel don’t meet our stringent standards for a wonderful company.

We are always pleasantly surprised by what we find in the stock market.

We are surprised by how their achievements are overlooked by professionals. That’s because we look in places where they either choose to ignore or choose to overlook.

Let us surprise you too by finding more about us here.

A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter.

Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can 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 Director David Kuo doesn’t own shares in any companies mentioned.