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TBH, Your biggest stock picking and Pokemon mistakes are the same

Disclaimer: This is a sponsored post for ShareInvestor – a financial portal that provides financial market data, which is useful for those looking to pick individual stocks. We still advocate a long-term, buy and hold for passive index investors.

You probably haven’t played Pokemon since the early 2000s, so here’s a refresher. You’d start out in Pallet Town, collect your eight badges, did the MissingNo cheat, beat the Elite Four, then capture MewTwo.

You’d be the strongest player in the whole game. 

But if you ever ventured beyond story mode and battled with your friends (using a GAME LINK cable in the 2000s, but nowadays you can battle online), you wouldn’t find victory as easy.

Because unlike the main game, where you just won on sheer virtue of being the protagonist, Pokemon battling with other people actually needs a lot of thinking. 

And yes, there is plenty we can learn about investing from this classic game. Read on. 

Picking Pokemon based on familiarity

Let’s talk about a Pokemon everyone knows – Pikachu.

Would you use Pikachu to battle? Probably not. Just because it’s popular, doesn’t mean it’s automatically worth a slot in your team.

The same goes with investing. We often have people asking us if it’s a good idea to buy DBS stock or Singapore Airlines, simply due to familiarity or news coverage – without doing any research whatsoever.

Make no mistake: being a household name does not always make a company great investment. How many Pikachus are there in your portfolio?
 

Picking Pokemon of just one type

Without any understanding in Pokemon strategy, your idea of a great Pokemon team to battle with will be perhaps something like “Six Mewtwos/Dragonites/Gyarados.”

Now, there is no doubt that those are impressive Pokemon individually, but they are easy countered. It just takes one strong Ice-type Pokemon to wipe out your entire team of Dragonites, for example.

You might win your first game (short term) due to shock value, but chances are if you try that against any skilled Pokemon battler more than once (long term), you’d be quickly defeated.

For stocks, this is the equivalent of investing in one segment of the industry that is doing extremely well at the moment. 

Yes, you might profit tremendously in the short term. But the risks of suffering debilitating losses are also there if you persist long term without diversification.

 

Picking Pokemon based on past performance

There were originally 151 Pokemon that were first released in 1996. Today, there are 890. Pretty insane, I know. 

With these new Pokemon, the meta has also changed drastically. Pokemon now have different abilities, they can hold items and there are even new types – Fairy, Dark, Steel, etc. 

Any player who has stepped away from the franchise for even three years would find it hard to win a battle against more current players. Change is indeed the only constant.

Similarly, the stocks that were absolute rockstars in the past – like  Raffles Medical in the mid-2010s, might not be as good buys as they were back then. 

Which brings me to my point: Do not use outdated information or preconceived notions when actively investing. There’s a reason why people pay for market data i.e ShareInvestor (our sponsor) and Bloomberg Terminal.

 

Picking Pokemon because someone else picked them 

I’ve saved the silliest mistake for the last, and it’s relatively straightforward.

Even if you were given a team of tournament-capable Pokemon today, the chances of you winning a battle would be relatively slim – because you won’t know the strategies of each specific Pokemon and how they work together. That kind of knowledge and skill comes from staying invested and updated. 

That’s the exact same reason why you should not blindly copy the investment strategies of influencers and gurus. There’s just so many variables in between that could make things work for them, and not you. 

These include: 

Risk profile and holding power. Can they take a lot more risk than you because of their wealth? 

Entry price. They might have gotten into the stock earlier at a lower price compared to you. For example, they bought the stock at 1.20, and you, 3.00. They can afford to sell 2.40 for a 100% profit, but you’ll be making a loss instead.

Conviction. Finally, there will be times where you will have to ignore market noise and to hang out on your investments for dear life. 

Coming to your own conclusions helps you stay firm and stay invested. 

Copying someone else’s portfolio? It generally doesn’t inculcate that kind of devotion. 

If you want to pick stocks, then you most certainly need to evolve.  

Stay Woke, Salaryman. 

A message from our sponsor: The numbers matter, a lot. 

Behind every Pokemon’s cute character design are actually a set of six numbers, or ‘stats’.

These stats determine how much damage your pokemon does, whether or not it attacks first and how well it can withstand opposing attacks. Very important. 

And while there are a few other factors that add to how ‘strong’ a Pokemon is in battle – such as abilities and items – those stats are often a good starting point to begin.  

In investing, there are even more metrics to analyse – there are the basics such as P/E, EPS and EBITDA, but are others that you’d have to dig through the company’s financial report to find out – such as a company’s top shareholders, 10-year historical data as well as insider sales. 

Our sponsor ShareInvestor consolidates all of them in one place, so you don’t need to dig around free sites and waste your time (you could also, no one is stopping you. In general, the larger your portfolio, or the higher your hourly rate, the more it makes sense to spend on ShareInvestor.) 


With prices starting from $18 per month, we think it’s a decent sweet spot between free market tools (Yahoo! Finance) and reports vs a US$2,000 Bloomberg terminal.  You can get a free trial here.

Our friend, Financial Horse has also done a review of ShareInvestor, check that out here

 

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4 replies to “TBH, Your biggest stock picking and Pokemon mistakes are the same

  1. If you live in Indonesia there is not much index fund to choose. And they tend to have high annual Cost and suck at performance. That make Index fund lose it meaning.

  2. The S&P index is the better investment tool. 500 best companies and it keep changing. Historically it out performs most stock pickers.

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