Wednesday, February 21, 2007

Bruce Lee and the Stock Market

The first question that may run across your mind is, what exactly can Bruce Lee contribute to the education of a new investor and trader? In one word: flexibility.

I read all sorts of different blogs and books. Some discuss strictly fundamental analysis, some technical, and others a mixture. Some deal with a short time frame; others long term. Why do I read material that covers the whole spectrum of investing and trading? Because success is not about doing the right thing; it is about doing the thing that is right for me.

Investing and trading is first and foremost an articulation of an individuals skill to critically analyze a situation using a particular methodology and the ability to emotionally implement that thought process using the selected skill set. Some are more suited to an investing process that deals with the short term, others may find that they wish to focus on the long term. Bottom line, successful investing is about being honest with yourself and knowing your limitations.

But deciding on what tools to use, i.e. fundamental vs. technical vs. quantitative, before giving thought as to what tool or combination of tools works for me would seem to be (as my contracts professor used to say) putting the cart before the horse. There are a lot of ways to succeed in the stock market, but at this point I cannot say which one might be best for me. This brings me back to what Bruce Lee may be able to teach new investors and traders about the stock market.

Bruce Lee is often credited with inventing a new style of martial art, or as he might say, a lack of style. Bruce Lee felt that no particular style of marital art was better, or worse, than any other. He believed that one should not invest themselves emotionally in any set paradigm of fighting style beyond a few core principles because doing so would foreclose reform or improvement. He simply felt that in a fight you should use what works and take what works from any place you can find it. That is because all people are different, and if we are all different, than one size of fighting can never fit all. Or in his own words:

Any technique, however worthy and desirable, becomes a disease when the mind is obsessed with it. The highest technique is to have no technique. My technique is a result of your technique; my movement is a result of your movement.

When one has no form, one can be all forms; when one has no style, he can fit in with any style. Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water my friend.
Successful value investors will tell me that value investing is the way to go because that worked for them. Successful trend, technical, and any other style of successful investor will tell me that their way is the best because that worked for them. But the point is I am not them. To adopt their way as my way before I figure out which way works for me, may not be a way to make me successful. It may simply mean that I prematurely confine myself to a limited form. As the above quotes warn, becoming enthralled with one particular approach simply stunts growth. Rather one should keep an open mind to all methods.

Thereofre, it is important that a new investor should not too soon foreclose any avenue which may lead to success. All a new investor should care about is being a successful investor. Maintaining an open mind as to how one achieves success may serve the new investor well.

6 comments:

Marlyn Trades said...

Steven - absolutely excellent piece!

juan said...

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Anonymous said...

Caveat emptor,

When the BS is bigger than the Bull, the Bull dies.

1 ??? Manny says he bought a stock.
2. Manny alerts the Lemmings to "Buy Now !"
3. Price starts to Rise with 2000 plus Lemmings buying.
4. Manny sells his shares at a profit.
5. Manny then and not till then "alerts" Lemmings to sell.
6. Manny making money on your subscription AND on your Lemming mentality.
7. Manny Scheme is Modified Madoff ..Bread and Water future for Made-Off Manny !!

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