Are you really an investor?

There are numerous "investors" out there who had blogs and a huge following (the reputation system in InvestingNote is a joke). They often rationalized their ideas in excruciating details. I am extremely amused because I think the shorter you can explain an idea, the better it is.

Nevertheless, these "investors" liquidate their positions as soon as they have a 10% gain or so. This is pure nonsense. Let me explain:

Assume I buying a stock because I think the book value is worth $1, and the market is trading at 90 cents. I would be extremely reluctant to buy it. I would love to buy a stock if it is 60 cents or below on very promising stats.

So I bought this stock at 60 cents, I would never sell it at 70 cents. I might be tempted to sell at 85 cents. But never at 70. You can get to 70 based on market fluctuations alone.

Neither would I sell a stock if it fell from 60 to 45 cents-- I will definitely buy more because I usually don't allocate all my capital at one go right from the bat.

Nobody buys a stock on a 10-15% discount to their value. This is nuts. How can 10-15% be an adequate margin of safety? I only consider myself moderately right on an idea when I get a 20% gain.

You can pick two person with fairly similar investing knowledge, perceived value on the same stock, but the temperament will set them apart. When a stock goes down 20%, one is a seller and the other buys more. Psychology plays a major part in investing and it is your actions that tells you what kind of investor you are. I have been on both sides of the boat.

Listen to the rationale of the investor and not his (or her) reputation. Some guys just have a big portfolio but they are unlikely to get their net worth from investing. This is pretty obvious from their investing ideas and reactions to the stock market movements. You can spot the real investors only when the market disagrees with them. Nothing is more sexy and inspiring than conviction.