tive light, and this will clearly affect your motivation. There are many things you can do to overcome negative percep- tion. I could easily recommend a dozen books that will help you, but the best way to change your perception is to take a chance and to succeed. Nothing changes attitudes and perceptions like good old profits!
You may recall that I emphasized the importance of avoiding the pitfall of equating expectations with realities, that just because you expect something to happen does not mean it will. This is a significant distinction to be given serious consideration at all times. Do not make the mistake that so many investors make. Do not allow an expectation to take on the role of a reality, unless the expecta- tion is confirmed or validated by actual events or other methods, which you will learn as you continue reading.
At this time, I would like to show you a three-step process that leads to action. Note that this approach is applicable to any form of investment. I call it the “setup, trigger, and follow-through”
approach, or the STF method. Here are several examples of the STF approach, which I believe will drive my point home fully. If you don’t follow my logic at first, please go back and read these examples again. Once you understand the STF method, you will see investing in a whole new light. I believe this new view prom- ises to open doors in virtually all areas of your life, investment and otherwise.
Example 1: Premature Action Based on Faulty Evaluation of Reality
Your boss sends you an e-mail requesting to meet with you as soon as possible. You don’t like the tone of the message. Previ- ous similar communications from your boss have all been indic- ative of problems for which you were reprimanded. You conclude from the tone of the e-mail and the terseness of the message, that you are headed for trouble. You feel justified in being con- cerned, because the history of such communications has always meant trouble for you.
I call this portion of the experience the setup.Based on your experience, you believe you are being set up or prepared for a
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bad experience. You believe that this is the first step to a bad outcome for you. And your conclusion is reasonable; however, you need more proof. What if this isn’t the setup you expected?
What if this time the outcome is a positive one? What if your boss normally has a negative attitude or tone, whether he or she is angry or not? How would you know when your boss is pleased with your work if you have not yet experienced that behavior under such conditions? What if the boss used a form letter? What if he or she has an intimidating style simply to assert his or her position of power? There are many other possibilities, but you won’t even consider them because you have already gone beyond the reality of the e-mail. And the conclusion you have reached could work against you.
You agonize over the e-mail all weekend, and on Monday morning before the meeting your ego gets the best of you. You decide that you will resign before you are fired. You decide to give your boss a piece of your mind before you have solid infor- mation that you are indeed headed for trouble. You march into the boss’s office at the appointed time with a negative attitude, not knowing that he or she is about to offer you a promotion.
Before your boss has a chance to utter a word, you give him or her a piece of your mind. The boss listens quietly and then replies,
“Well, it’s too bad you feel this way. I actually had a good pro- motion for you, but given your terrible attitude and insulting comments, I have decided not to give you that job. Clean out your desk and leave now!” Well, my friend, you have really done it this time! By acting on a setup instead of a confirmed situation (the trigger), you have cost yourself prestige, reputation, money, and pleasure. You acted too soon. You pulled the trigger in the absence of confirmation, and you have paid for your error.
Action must follow a logical sequence. The logical sequence of events that leads to action is first the setup, or the situation that creates the POSSIBILITY of an event. Second is the trigger that
tells you the event is likely to happen and will lead to the follow- through or the action. Never act without a trigger or confirmation.
Example 2: The Hunter and the Hunted
Hundreds or even thousands of hunters are injured or worse every year during hunting season, because many hunters are trigger-happy. They will shoot at anything that moves. As long as it’s the color of a bear or a deer, they’ll shoot at it. Hunters have been known to shoot at large brown dogs, human beings dressed in brown, human beings wearing fur coats, decorative animals in front yards and backyards, automobiles that may look like an animal from a great distance, and so on. This is another simple case of action prior to confirmation. The movement of an ob- ject is their setup. They shoot before they have confirmed that the movement is that of their prey. It’s a simple case of failure to confirm that the setup should trigger action. And in the case of the hunter, failure to confirm results can be devastating.
Example 3: Rumors and Realities
Your brother-in-law calls you with a hot stock tip. He knows the son of a high-ranking corporate officer in an electronics firm that is about to announce a new discovery in the communica- tions field. This revolutionary antenna will supposedly increase the range of any handheld communications device by 50 per- cent. And, the cost of adding this new device to existing com- munications equipment is very low. The company estimates that it can sell over 30 million units at $29 per unit in their first year of operation. What’s more, a major manufacturer of communi- cations equipment has expressed interest in buying the company.
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Your brother-in-law tells you that the stock of this small company is selling at $3 per share, but that when news of its discovery be- comes public the stock will soar to over $40 per share in a mat- ter of weeks, if not days. He has already positioned himself with 5,000 shares. If the stock goes to $40, as he expects it will, his
$15,000 investment will be worth $200,000.
Naturally, you’re excited by the prospects of such a move, and you buy the stock. Then you hear that the news is false or exaggerated, the stock declines, and you either take your losses or you keep the stock indefinitely, expecting it will eventually go up. At some point, you may even be tempted to buy more if the rumors persist. You have hope and greed rather than reality and good sense.
Where did you go wrong? You allowed a setup to prompt you into action in the absence of confirmation. What would you need by way of confirmation? In this case, there could have been many things. You could have done your own research to confirm or negate the rumors. You could have studied the finances of the company. You could have asked more questions. You could have done a thorough search on the Internet for more infor- mation. You could have looked into the backgrounds of the of- ficers and technical experts at the company. You could have asked your brother-in-law how successful his tips have been in the past. You could have studied the stock charts and indicators.
You could even have looked into whether insider-buying activity had been going on in that stock. But you didn’t do any of these and instead acted without a trigger—and you paid for it.