Ignoring My Instincts

Today's Net Worth $979 420

I have decided to load up next week on General Motors common stock. The vast majority of major analysts agree it is undervalued, and my own analysis shows the same. It also is trading at over 90% of book value right now, so the safety component is also high. The only problem is that they went BANKRUPT about 5 years ago. Yowsers! I can't imagine loosing all that money if we get another financial crisis and they go BANKRUPT - again.

Are harmful animal instincts getting the better of me? Do I dare risking buying heavily into a company that has only just recently been re-floated?

I decided to use all the cognitive neuroscience tricks in my arsenal to determine if my prefrontal cortex was the boss or my reptilian complex was ruling the roost.

1. I meditated for a few minutes before finalizing my decision. If after 10 minutes of mediation it still seemed like the right decision, then it probably was.
2. I visualised, in MS Excel, what my new portfolio would look like as if I had already bought the shares. I asked myself things like:
• What would the new book value of my portfolio be?
• What would the forecasted portfolio earnings be in 5 years?
• What would my portfolio look like if I left it the way it was, or bought something else. All of this helped me get unstuck from the current state.
3. I asked myself what my financial idol, Warren Buffet, would do in my place? His advice was clear, "be fearful when others are greedy, and greedy when others are fearful." I firmly believe that this is a situation where many people are still jittery about GM, hence I should be greedy.
4. I will sleep on it a couple of nights to make sure I am not letting any sub-concious (i.e. greed) emotions take over.
5. The most important thing I did was to confirm that it met all my investing rules. For me, it is expected to trade shares, but only to maximise the execution of my investing strategy - not because i am just reacting to recent events.

Well, I let you know how it goes. Hopefully this decision will take me a couple hundred thousand closer to my goal of $5 million.