From its inception in 1977, Star Wars has captured the hearts of many globally, young and old alike. Apart from learning about the force, what if the masters of the force like Yoda and Obi-Wan Kenobi were also masters of investing? Famous Obi-Wan Kenobi once said, “In my experience there is no such thing as luck.”
Curious? Read on, you must, as these Jedi Masters stop you from the dark side of the market forces.
- Beware of Greed and Fear
“Greed can be a powerful ally”
– Qui-Gon Jinn (Episode I: The Phantom’s Menace)
“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”
– Yoda (Episode I: The Phantom’s Menace)
Irrational emotions from the general investor can greatly influence short-term market prices. The insightful Warren Buffett once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.”. One may wonder if he is the Yoda of investing.
- Do Not Blindly Follow Market Predictions
“Difficult to see. Always in motion is the future.”
– Yoda (Episode V: The Empire Strikes Back)
No one knows for certain what the future holds. Pre-existing biases exist in each and every single one of us, which translates to the projections that we hold true. This same logic holds true for the programs built to predict the future. After all, it is humans who programmed these programs and machines.
“Well, if droids could think, there’d be none of us here, would there?”
– Obi-Wan Kenobi (Episode II: Attack Of The Clones)
Models that are used in these predictions are often a balance between accuracy, and complexity. The more parameters added in, the higher the accuracy, but the harder it is to understand the model. Therefore, many existing models in place sacrifice certain parameters, foregoing accuracy in exchange for simplicity.
It will be wise to learn to not place 100% trust in all these prediction models.
- Slow and Steady Wins the Race
“Patience you must have, my young Padawan.”
– Yoda (Episode V: The Empire Strikes Back)
“Adventure. Excitement. A Jedi craves not these things.”
– Yoda (Episode V: The Empire Strikes Back)
Yes, it might be thrilling to engage in the investing fads (i.e Dogecoin, Gamestop) that come and go, attempting to profit out of them. The reality is that it is very difficult to get rich in the stock market overnight. Focus on the long term, and do not take more risks than you’re able to handle just to chase higher returns, and you might just find yourself getting wealthier over time.
- Limit Your Risk
“You are unwise to lower your defenses.”
– Darth Vader (Episode VI: Return of the Jedi)
Beware of potholes that may cause you to stumble. These may come in the form of biasness, causing you to seek only information that fits in your hypothesis, and ignoring all the other red flags along the way. It might also be wise to know that “past performance is not an indicator of the future”.
When the market begins booming, you will become more prone to chase higher returns, as greens start to replace reds all around. Be on your guard, you never know when you’ll be stepping into a sinkhole.
- Stay The Course
“Now, be brave and don’t look back. Don’t look back.”
– Shmi Skywalker (Episode I: The Phantom Menace)
Last but not least, if you have done all necessary research and are confident of your decision, stick by it, no matter what happens out there. It may be hard to ignore all the noise, especially from people that you trust. But have faith, and pull through, the dark side will never get to you.
“If you want to be successful in a particular field, perseverance is one of the key qualities.”
– George Lucas
Summary..
Hopefully you have managed to learn a lesson or two from these Jedi Investing Masters. As we part our ways, it is almost mandatory for me to say…
“May the Force be with you.”
