Investor impulses, parcels and disconfirming evidence

Investors do not buy on impulses or tips:  Invest where you have a competitive advantage based on your ability to analyse a company, not on a wim or tip from a friend, newspaper or broker.
Investors avoid ‘pass-the-parcel’ shares
Shares that have a great deal of upward momentum, which is sustained by people thinking that they can sell out at a higher price because current excitement will keep pushing the share forward (rather than based on fundamental qualities) are to be given a wide berth.
Investors don’t close their minds to disconfirming evidence
Once a share is bought there is a natural human tendency to avoid looking at or ignoring evidence that does not confirm our original investment thesis; we have a psychological aversion to the idea that we made a wrong decision.
But it is important to keep an open mind; to be receptive to disconfirming evidence.
‘Don’t be too stubborn about your views but don’t lose all your conviction. Ideally, your conviction level should be around the 50 per cent level (where 0 per cent equals no conviction and 100 per cent means you are so convinced you would never change your view).’ (Anthony Bolton)
Investors accept cr
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