Unactionable advise

Things should be made simpler, but not to such an extent that a big part of the meaning is lost. We often hear of market truism like the following:


1. Buy low, sell high
2. Don't lose your capital
3. Diversify diversify diversify


and many many more. I'm sure if we look hard enough, we can find contradicting truism that runs contrary to an existing one. With regards to the above 3 truism, I can think of the following contradicting ones:


1. Buy high, sell higher
2. If we win more than we lost, we still end up being profitable
3. Focus focus focus


To a newbie, everything is so confusing. If you follow this guru, he'll recommend that you focus all your energy to just a few companies and learn everything you know about it. If you follow another guru, he'll recommend that you'll diversify to reduce your risk and as long as you win bigger than you had lost, you'll still come out ahead winning the game. Who to believe? Who to trust?

The problem with such market truism is that the context that such truism is applied is often lost when reduced to a single sentence. The particular is sacrificed for the general, and in return, we immortalised the real market observation with a catchy soundbite that the public consume readily.


Buy low and sell high. Sure, but how do you know when it is a low and when it is a high? Is there a situation when you can justify buying high and selling it higher? Isn't it what growth investing is about? Don't lose your capital. That's both rule number 1 and rule number 2, repeated ad nauseum to a hungry crowd of fans. Who in the right mind wants to lose capital? Of course nobody expects to lose their capital, but how does one NOT lose capital? By not investing? By investing wisely? Then what's wisely? Even the guru himself lost money, so what can we minions do about it? Diversify to reduce market risk, says one guru. Concentrate and don't diworsify, says another. What is happening?


It doesn't take a lot of intelligence to understand these market truism, but it takes a lot of wisdom to know when each will apply. How does one gain wisdom? By making mistakes and learning from them. How does one make mistakes? By trying, failing and getting up all the time until you learn from it. Do you really think after attending a course and reading a few books, you can start getting double digit yields?


Similarly, a lot of advise are also inactionable, because by immortalising them in short soundbites, we lost the context in which the advice works. Think about these:


1. Bring an umbrella when it rains
2. Be careful, don't make careless mistakes
3. Check their financial statements; you don't know if they will have accounting irregularities


When do you know it will rain? If you can careful, how do you make careless mistakes? If their accounts are rigged, why do you still read them? These are all very nice and well meaning advise, but I think ultimately, they are unactionable. You can't act because you don't know when the advise will apply. It's only after the deed is done can you sit back, reflect and rationalise the facts leading up to the deed and say, oh, I should have done this and that. Perhaps after a few rounds of iteration, we will finally know the when part of bringing an umbrella when it rains.


Perhaps, not even then.