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More Signal, Less Noise

Posted By Barry Ritholtz On October 25, 2013 @ 7:30 am In Cognitive Foibles,Financial Press,Investing,Psychology,Rules | Comments Disabled

Its Friday, the day I like to step back and get all Zen [1] on y’all.

As promised yesterday [2], our subject this morning — indeed, over the past few months — is how to reduce the meaningless distractions in your portfolio (and your life). You want less of the annoying nonsense that interferes with your investing, and more of the meaty data that allows you to become a less distracted and more purposeful investor.

This is a continual process. For me, finding moments of quiet contemplation to think things through is very important. Sometimes that means taking a walk through the woods, or sitting on a boat deck or merely relaxing in a hammock with no distractions. You may prefer meditation, jogging or yoga. Anything that allows you to get out of your self for a few is enough.

My daily process of waking before dawn and writing things down is an enormous aid to me figuring out what I think, to refining my understanding of what is really going on and why. I liken it to an editing process. I spend most of my quiet time deciding what to eliminate. After this process, whats left is almost all signal, no noise.

Here are some things you need to understand if you want to decrease the noise:

More Signal, Less Noise

1. News is Old — it is misnamed and not especially forward looking;

2. Data first and foremost; avoid the anecdotes and narratives;

3. Everyone talks their book (i.e., Whats their agenda?)

4. Recognize what financial chatter is merely idle gossip;

5. What is within your control? What is not?

6. Understand empiricism and probability analysis;

7. Eliminate all sources that are biased, or are not driven by your goals, or have a different agenda; (Delete money losers with Extreme Prejudice)

8. Understand the concept of time, and the long game

9. Separate what is for Fun and what is for Real

10. Refining your process is your goal. Get that right and the outcomes will improve naturally;

Your consistent focus should be to keep yourself concentrating on that which truly matters and learning to reduce or even better, ignore that which does not . . .

If there is interest, I might expand this into a full WaPo column.

 

 

Previously:
Things I Don’t Care About [3] (January 15th, 2013)

What Do You Control? [4] (May 30th, 2013)

Asking the Right Questions [4] (July 18th, 2013)

The Price of Paying Attention [5] (November 2012)

Who Do You Trust? [6] (January 2008)

Lose the News [7] (June 2005)

 


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2013/10/more-signal-less-noise/

URLs in this post:

[1] Zen: http://www.ritholtz.com/blog/2010/05/the-zen-of-trading-2/

[2] yesterday: http://www.ritholtz.com/blog/2013/10/look-out-above-i-dont-know-why-edition-part-ii/

[3] Things I Don’t Care About: http://www.ritholtz.com/blog/2013/01/things-i-dont-care-about/

[4] What Do You Control?: http://www.ritholtz.com/blog/2013/07/asking-the-right-questions/

[5] The Price of Paying Attention: http://www.ritholtz.com/blog/2012/11/information-sources/

[6] Who Do You Trust?: http://www.ritholtz.com/blog/2006/03/who-do-you-trust/

[7] Lose the News: http://www.ritholtz.com/blog/2005/06/apprenticed-investor-lose-the-news/

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