Critical Thinking

The skill of critical thinking is most often used in the scientific community. Scientists-in-training are subjected to a never-ending challenge to put theories, feelings, assumptions, and biases aside and focus only on the facts. It's a great discipline for an investor to have.

For example, suppose your friend recommends that you buy stock in Acme Steak House Corp. His theory is that steak houses will attract the growing list of the top 1% of wealth owners, and those who get in early will make a ton of money. If you rush out and buy Acme Steak House Corp, you have just failed the critical thinking test, and it's likely that you will lose lots of money.

If you had the skill of thinking critically, you would do the following. First you would quiz your friend about why he thinks this particular company will thrive. Then you will ask him where he got the idea. If it was his own assumption, and if you happen to disagree with him, you are using critical thinking by asking him for more information about the company. 

Next you would do your own research into the company. Are they making money? How much debt do they have on their books? Who is running the company? Has this person run other successful tech companies in the past? You get the idea. You must be skeptical of any stock recommendation that crosses your path. Think for yourself, and think critically.