Independent Thinking

Listen to Podcast Independent thinking is one of the cornerstones of successful investing. When you read the histories of investment icons like Warren Buffet, Sir John Templeton and George Soros, their best investments were not popular or well-known ideas at the time. These ideas were based on an assumption that the ‘crowd’ had not recognized the correct future value of the investment in question. In order to be a successful investor, you have to look into an uncertain future and make correct assumptions today. This is a counter intuitive exercise because by the time the bad or good news arrives it is too late. The basic theory of the efficient market hypothesis is that the value of an investment will be fully realized almost as soon as any information affecting its value becomes public knowledge. When the peddlers of investment ideas from Wall Street make recommendations public knowledge then that news should already be priced into or will be rapidly priced into the investment as soon as news is released to the public. Therefore, you need develop your own ideas long before the Wall Street ‘crowd’ jumps on board because it will be the crowd who will move prices to where you think they should be. That is why you must utilize truly independent thinking and develop your own investment ideas. It is probably no coincidence that Buffet is from Omaha, Templeton stayed in the Bahamas and Soros had to start his own firm to pursue his own investment ideas.