Revisiting Borrowed Conviction

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Jeff’s Random Words

Borrowed conviction. It gets a bad reputation. I’m sure even Jason and I have cast our fair share of aspersions (we sort-of did right here almost a year ago) on borrowing someone else’s conviction to buy a stock. But I think that might be wrong, at least initially. I think in certain circumstances it’s fine and perhaps even preferred to borrow conviction.

I consume a lot of investing-related content. Newsletters, podcasts, social media, there’s no shortage of ideas in my information universe. As a result, I am often inundated with stock ideas. Additionally, these stock ideas run the gamut from the popular to the obscure.

I like to think that while my information diet is plentiful, it’s also rather curated. I only read/listen to people I respect, who I think do good work, and who are not selling me anything. These people are also professionals in the sense that they spend their workdays researching and writing/talking about stocks and investing.

Why wouldn’t I listen to them?

Sure, I consider myself to be informed enough to research and pick my own stocks, but I’m also only doing it part-time. There are days or weeks when I can do a lot of thinking about investing and then there are days or weeks when I don’t think much about it at all. Life happens.

If I hear about a stock that interests me from someone who I respect, I am much more inclined to dig into that company and buy some shares to start to build my own knowledge. That’s borrowed conviction, straight up. Yes, over time I will develop my own conviction, but my borrowing doesn’t stop. If that same person who gave me the idea shares that they think the company is doing well, or that the valuation is cheap, I’m more inclined to buy more. Also borrowed conviction.

The more I think about it, the more I realize that very few of us actually DON’T borrow conviction. In fact, I think to some degree, not borrowing conviction might be dumb? If you find your own idea that you've never heard anyone talk about, why not ask around before buying? Isn’t that better?

If I am being honest, every stock I own is because of some degree of borrowed conviction. Yes, I developed my own conviction over time, but I was building on a borrowed foundation. Maybe that’s the smartest thing I’ve done as an investor.

Jeff

Jason’s Random Words

This is where I would usually cast aspersions at Jeff. But in this case I think he’s right, and I can’t really add much to this beyond what I think is the next — and maybe most important — step: taking that borrowed conviction, and then finding your own. The best investments, the ones that you can hold for many many years and earn exceptional returns on, only come when you move from, to crib our good friend Tyler Crowe, having enough conviction not to sell, to making the idea your own.

You can do it.

Jason

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