We often have difficulty finding ideas, particularly when creating a new project, when we start from a blank page: Which direction to take? What privileged factors? What are the best practices to adopt?
This inversion principle can be associated with a form of retro-visualization. It is about projecting beyond success and visualizing all the pitfalls that we have avoided to achieve it. So instead of finding ways to be successful, it’s about avoiding ways to fail.
If I ask you to tell me what to do to be easily picked up during a job interview, you will surely have a hard time answering me. It all depends on the position, the company, the employer. It also depends on other candidates and the conditions of the recruitment process. While if I ask you the best ways to fail an interview, the answers will immediately come to mind: not knowing the position or the company to which you are applying, arriving an hour late, neglecting your dress or still being flippant about your future employer are often fatal mistakes.
Charlie Munger is famous for once saying: “All i want to know is where i’m going to die, so i will never go there” never go to that place ”).
What if we retail investors have a big long-term advantage just by trying not to be dumb? Just by avoiding the simplest mistakes that have proven to be successful throughout stock market history.
This is the reason why I invite you to practice the inversion before each big investment decision. Instead of trying to anticipate the market and find what no one has seen in the markets yet, avoid factors that destroy value in your portfolio. Where there is more to lose on the downside than to gain on the upside. It is much easier to avoid bad stocks than to find the ones that will perform the most in 2022.
To do this, let’s look at the classic mistakes investors make, but they are easy to avoid:
His loyal sidekick Warren Buffett liked to remind people that the number one rule for an investor is not to lose money. By filtering your values to avoid the most indebted companies on the market, in decline, little or not yet profitable or even very expensive, you will perhaps miss a nugget from time to time but you will especially avoid many stones. in the shoe that weigh down the profitability of a portfolio.
Let’s see what happens with Zonebourse’s Stock Screener. Take the French market for example. We identify 875 listed French companies. By removing the 30% of companies with the lowest Outperformance ratings, for each of the “Financial health”, “Growth” and “Profitability” categories, this filters out more than 80% of potentially bad stocks for a portfolio. About 100 stocks come out of the Stock Screener.
It only remains to sort according to our priorities. For example, here with companies rated five stars sorted in order of revenue growth (and respecting our 30% filters previously set up).
