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Action Plan

One of the most important rules for any investor is to remain anchored in reality. In a world where many individuals prefer nonstop action over in-depth analysis, superficial appearances over hardcore substance, and conventional wisdom over contrarian thinking, it is easy to fall into the trap of believing that the stock market will carry on as before—or as the “majority” believes it will. Avoid the urge to substitute the word “should” for “may” or “will” for “could.” While it is possible—maybe even probable—that events could turn out as expected or as before, the key to consistent long-term success is to remain alert to the possibility that they may not. In addition, when you make an investment decision, evaluate your choice in a real-time framework, not a hypothetical one. Although it is fun to dream about the future, when it comes to investing, it is foolhardy to fantasize about the present.

As in the world of sports, do not take your eye off the ball for too long when considering your next step—otherwise, errors will invariably crop up. It clearly makes sense to contemplate what the future may hold and weigh potential outcomes, particularly during the initial stages of the decision-making process. However, if you focus too much on where you see things headed, you may miss the critical fact of where they actually are at present. It may sound strange, but it does seem as though Mr. Market always “knows” when investors are not concentrating on current developments, and the result is often a financial disaster. Whatever happens, banish the urge to picture what you will do with the money “after” you have taken your profits. In fact, if you hear yourself thinking in those terms, it is usually a sure sign that you should immediately exit the position. Remember, while it is the results that ultimately matter, it is the concrete steps along the way that get you there.


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