Besides choosing companies within your “Circle of Competence” which is a commonly used term in value investing, I feel that there is another important factor that is ignored by most of the investors out there which I would like to call “Circle of Community“. It means that the portfolio of companies that you buy greatly depends on the quality of your community.
For example, if you discuss companies with many random and anonymous people giving their opinions on platforms such as online forums, you wouldn’t expect the companies that you picked out to be of quality ones. Most of the time, you are trapped in a herd mentality. Taking the recent Hyflux saga as an example, I believe that there are many “investors” who invested in Hyflux as there were brokers or analysts giving recommendations to buy. They invested their hard-earned money without lifting their fingers to do their own due diligence of researching on it. You know the outcome, Hyflux filed for bankruptcy and investors lost their money.
Next, if you compare to a discussion done by a group of investors who understands each other style of investing and the quality of the information that they bring to the table, you would be able to uncover great companies that may be still hidden in the eyes of the majority.
“You Are The Average Of The Five People You Spend The Most Time With”
Imagine being in a community with investors who have much more years of experienced than you, you are going to grow your knowledge like your investments, exponentially. This happened to me after I joined a community by Kelvestor.com. From the day I was accepted into the community’s facebook group, I scrolled through the entire archive and their way of investing absolutely aligned with mine. This gave me a better sense of direction of way I was heading to.
Following which, I decided to do a “portfolio extreme makeover”. I knew which of the companies that I own were ‘weeds’ and which were ‘flowers’. Previously when I was investing by myself, I kept procrastinating on selling the ‘weeds’ as I would need to incur losses. But by investing with a group of like-minded investors, it gave me the courage to do what I feel that is right.
Investing alone is hard, let alone during economic crisis. Seek for a group of community that has the similar investing philosophy and form your own “Circle of Community“.