Have conviction and make money?

It is impossible to see into the future. People who say that they can are like fortune tellers.

How much are their advice worth? How much would we pay fortune tellers to read our palms?

Whatever decisions we make are based on a whole gamut of factors. Then, we have certain expectations of how things would turn out after making such decisions.

The more thoroughly we could reason our feelings of conviction, the higher our chances of staying the course and, dare I say, that our decisions could deliver on our expectations.

Regular readers would probably get the feeling that for whatever has done well for me, I have been reasonably rigorous in my reasoning for those decisions (e.g. to be invested in industrial S-REITs in the last 3 years).

Every person, I believe, has flaws. I have a whole bagful of flaws. One flaw I have when it comes to investment is that I tend to be more careless when I do not have a feeling of crisis.

To have conviction is good but it has to be well reasoned. If I am unable to reason well my conviction, there shouldn't be any conviction.

Remember, however, that conviction is only part of the equation. Luck plays a big part in whether things turn out the way we expect them to.

I was reading The Business Times (weekend edition) and came across an interview with Isaac Souede, the chairman and CEO of Permal, one of the world's largest hedge funds groups.

He is reasonably bullish on China and is exposed to Asian equity through China, "which is seen as pivotal to Asia's fortune."

"If I'm wrong and China has a hard landing, all of Asia won't grow... Most countries in Asia (except India) are in the glide path of a pro-growth policy... which is very positive for equities. But the harbinger of all that is China...

"If Europe stays on a glide path of zero growth for the next five years, US and China will be fine... As long as Europe doesn't become cataclysmic and create a financial issue, then it can be at least cauterised. Europe is a very long term, trial and error solution. The key is for the US and China not to implode."

His conviction is strong and he has his reasons. However, so many things are not within his control. So, a good dose of luck is needed to deliver on his expectations.

Making money needs more than well reasoned convictions but well reasoned convictions should be part of the money making process.

Related posts:
1. Excuse me, are you an investor?
2. How did AK71 overcome his losses?

Millionaires usually emerge from bear markets richer.

On 9 July, I wrote a piece on how fear of a collapse of the eurozone must be so strong that investors are paying Germany to borrow money from them.

Today, I read in The Business Times that "Millionaires added US stocks more than any other asset in the latest year as average investors fled to bonds, according to a survey by Fidelity Investments."

The survey involved 1,020 households with at least US$1 million in investable assets, excluding retirement savings and property, for the 12 months ended March 2012:

20% bought individual domestic equities.
13% added to the cash positions.
11% bought into ETFs.
10% added to bonds or stock funds.

Average age of respondents: 61 years old.
Average investable assets: US$ 3.05 million per respondent.

"They're probably ahead of the average investor in how they view opportunities," Bob Oros, EVP in Fidelity's wealth services group, said of millionaires. "They're becoming less and less risk averse."

Millionaires' outlook for the future of the economy was the most positive it has been since the annual study started in 2006.

We know that millionaires usually emerge from a bear market even richer than before. Now, do we know why?

Related posts:
1. Borrow money and be paid to do so.
2. Perpetual bonds: Good or bad?
3. Should we be staying invested or in cash?