Choosing your own shares remains attractive for many savers. The idea seems simple: analyze companies, find gems, buy at the right price and wait for the Stock Exchange to do the rest. But in practice, this approach is not enough to build sustainable performance. Because a portfolio is not just a list of convictions. You also need to know how to manage risk, arbitrate, accept your mistakes, adjust your positions and hold out over time.
Stock picking can even become tricky when it reinforces the emotional involvement of the investor. The more in-depth the analysis, the more the attachment to the title can grow.at the risk of making a bad decision when faced with a change in scenario. For Fabien Grasso, manager of the Aetheris Patrimoine firm, member of Club Adunéa, selecting actions is only a first step: performance is then played out in monitoring, exit discipline and consistency with the level of risk that is actually acceptable.
When attachment to the title clouds judgment
The major danger of stock picking is emotional. “Stock picking alone is not enough to generate performance on the stock market because it exposes investors to behavioral biases likely to influence their decisionswarns Fabien Grasso. In-depth analysis of a company, its financial statements, its valuation and its governance can create a strong attachment to the stock and make a sale more difficult despite unfavorable signals..
Hence the need for a clear rule: “The selection of securities must therefore be accompanied by regular monitoring and the ability to exit a position when the investment scenario is no longer validated”. Performance does not only depend on the initial choice, but also on the discipline to cut a position that has become less relevant.
The quest for outperformance drives risk out of control
Another trap: the desire to do better than the market at all costs. “The search for outperformance can encourage investors to favor more dynamic and potentially more volatile stocks”observes Fabien Grasso. The danger is then to “deviate from the level of risk initially accepted without the investor being really ready to bear the declines or to wait for their absorption”alerts the manager.
Under the shock of a brutal price correction, “this discrepancy can lead him, under the influence of emotion, to cede his positions at a loss”. Real performance therefore comes not only from the right choice of securities, but from the ability to keep a portfolio aligned with its risk profileincluding in phases of turbulence.
