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What if the latest data seriously conflict with your investment thesis?

Do you follow John Maynard Keynes who once famously quipped when accused of changing his position on monetary policy in the Great Depression: “When the facts change, I change my mind. What do you do, sir?” (Source: Wikiquotes)

Or, do your actions sound a bit more like this passage…

Investors’ desire to align their behaviour with their beliefs causes them to interpret the information they receive in a way that leaves those beliefs intact. …We will choose to discredit, downplay or even ignore any inconvenient signal for reasons that have nothing to do with our belief in the methodology or, heaven forbid, profit maximisation.

If you suspect the latter quote describes your system of interpreting information, perhaps you should read the entire article, Self-Fulfilling Destruction, found here. It is a short passage but really nails down one of the biggest issues we face as investors: how do deal with information that doesn’t support our current investment thesis.

What does this have to do with the Fund King System?

The truth is that we do not invest with perfect knowledge. However, even if one were so deluded, that assumed perfection would melt away when the first piece of new information became available. An investment system is a tool to help overcome our natural desires to enthusiastically embrace confirming data while quietly ignoring conflicting data.

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