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 Artificial Intelligence Corp. His theory is that AI is the wave of the future, and those who get in early will make a ton of money. If you rush out and buy share in Acme Artificial Intelligence 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. Then you would ask him for the ticker for Acme.

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.