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2018_Tools_for_EBM

This survey aims to gather information about specific tools in advance of the AORA EA2OHS workshop on Tools for EBM. 
Please enter the case name:
Inwestuj
Contact person  (name and email)
<a href="https://inwestujfinanse.pl/" itemprop="url" >inwestujfinanse.pl</a>
Reference to documentation. Please include references to method descriptions and links to reports of the application in management.
When practice doesn't make perfect, which is why investing is so difficult
2018-05-14
BLOG / EQUITY MAGAZINE 41
The 10,000-hour rule is that if we want to be at the forefront of the best in a given field, regardless of whether it is chess, programming or learning a foreign language, we have to spend about 10,000 hours of practice. This can be translated into 7 years of study, assuming 4 hours of practice each day of the year. This theory was popularized by Malcolm Gladwell, in his book Beyond the Scheme. Secrets of Successful People ”indicates many examples, such as Bill Gates or The Beatles. And while the Gladwell 10,000 Hours Principle has been repeatedly criticized with greater or lesser success, undoubtedly any area in which we want to become proficient requires practice. It is hard to disagree with the truth of the statement that success requires, above all, hard work and can be applied to virtually any field. Anyone, except investing.

Systematic work certainly works in disciplines such as sports or music, i.e. in areas where the rules are not only known, but also stable. The authorities in these fields do not change often and can easily confirm their dominance. In the case of investments, we are dealing with a completely different world where the rules of the game can turn around at any moment. The methods that yesterday gave some success tomorrow may be worthless.

Michael Burry in "The Big Short" aptly concluded that there is no school that teaches you how to be a great investor. If such a university actually existed, its tuition fees should be horrendously high and it would be fully justified. Harvard for investors is nowhere to be found in the world, the financial market has nothing to do with our CV, the quality of schools and the number of courses we enter into it. Only the result that we are able to achieve with our skills counts, and these are constantly tested in constantly changing conditions.

An element that arouses particular controversy in investing is the role of luck. Some people do not allow the possibility of admitting that it has a very important role, fearing to undermine their own authority or even the role of a market guru. Another part of investors says directly that the role of happiness in the capital market is huge. Warren Buffet himself has repeatedly said in interviews that he doubts that he could repeat his success if he had been born at different times or even in a different country. He describes himself as a person who has met a lot of happiness in his life, and in his investment councils he never recommends investing actively or blindly following market experts who allegedly know better than others.

Consider for a moment whether it is possible for a novice holding a scalpel for the first time in his life to successfully perform fetoscopic spina bifida surgery? No. Is it possible for an amateur to play the violin concerto in D minor Op. 47 by Jean Sibelius while holding the violin for the first time? No. Is it possible for an average person without economic education or experience to select companies that will bring him several dozen percent of profit? Yes, and it happens so often that it is even talked about the beginner's happiness in investing.

The hardest part of investing is repeating success, the law of regression to the mean is merciless and works for both amateurs and professional managers. Other statistical functions also have an impact on the perception of investment performance. If 100,000 people toss a coin, those among them will be those who toss the eagle 20 times in a row. Nevertheless, their chance for a coin to fall the same side for the 21st time is exactly the same as for the first flush. Regardless of whether we believe that investing in the stock market is pure statistics and random wandering or not, you cannot disagree that luck plays a significant role here. Famous and respected world-class investors are aware of this and try to make the most of this mechanism. Skills, knowledge and experience obviously play a significant role in the long term, but it is much less a determinant of success than in the aforementioned sports or professions requiring precision and efficiency.

There is undoubtedly a group of investors who have been successful in the stock market many times. Not only does it take time to decode their success, it can also lead to wrong conclusions. Methods that were effective a few years ago may no longer work and may even cause additional losses. Online forums are full of ready-made strategies and setups, especially in the area of ​​technical analysis. In many cases, they were market tested and generated positive returns. This does not mean, however, that they will make a profit again, as market conditions may have already changed significantly. And the number of variables is almost unlimited - from the types of instruments
Please provide a short description of the case, include a list of aims and the management options explored:
financial elements, through the phases of the session and types of exchanges, to time periods or methods of conducting profitable strategies. A candlestick pattern or a stochastic indicator that operates on the Asian market will not necessarily earn on Polish contracts. It is an open secret that working strategies are put up for sale (or made available for free on forums) only after the profit potential of using a given method has significantly exhausted.

Daniel Kahneman in his book The Traps of Thinking. On thinking fast and slow ”describes an interesting experiment carried out on a group of 25 financial advisers. He analyzed their 8-year work results and although all of the test persons were convinced of their above-average skills, the analysis showed quite the opposite. Despite the fact that they spent a lot of time following the stock market charts, watching news and reading professional press, their investment results did not differ from the average achieved by people who are not professionally related to this industry. Kahneman points out outright that these people were rewarded for their happiness, not for the skills they displayed. His criticism met with great resistance from some of the community, defending the well-established status quo, which guarantees people from the industry an alleged advantage over the rest of the market participants. The author points out that the vast majority of managers fail the consistency test of delivering results, and over a period of several years those who are the best often also pass the year in which their performance is the worst in the comparative group.

Many experienced investors will agree that the ability to do nothing is one of the more difficult - and also more important - in the range of skills necessary to be successful in investing. This is another non-intuitive principle that is eminently related to investing - in most other industries, it is activity that gives us an advantage and experience, not passivity. It is about not making hasty decisions about commitment to a given asset, and about attitude towards the positions we have already taken. The latter case can be particularly difficult, because our intuition often tells us to reduce profitable positions and average those that are losing. This leads to a reduction in profits and maximization of losing positions, and yet we want to achieve the opposite effect.

The art of investing is largely based on mastering the basics that are useful at any level of investing - both for beginners and professionals. Basic risk management, controlling emotions while taking and holding positions or deepening your competence zone are areas that need to be mastered perfectly if you want to earn money on the stock market in the long term. For example, the simple rule of investing never to play against a strong trend is consistently broken even by experienced traders, even though everyone knows it and mentally agrees with it. This can be seen, for example, among people who have been trying for years to reach the top of the S & P500 index, which has so far consistently set new historical highs.

If, on the other hand, we professionally deal with investment consulting, our most difficult task will often be to protect clients from themselves, i.e. mainly the tendency to buy at the tops and return losses in the moments of the greatest panic. In most cases, the struggle with the human psyche is more difficult than creating an advanced DCF or running a complex system of technical indicators. Professional investing is a bumpy road to the top, to which everyone must find their own path and follow it consistently.
Please indicate the specific geographic location of the case: b
If possible, please indicate the geographic extent of the case (e.g. km2) b
Please indicate the name of the tool(s) used:
b
Please choose a category that best describes  the tool used in the case: Spatial Planning
Please describe the data required to use the tool:
b
Please shortly describe the strength of the tool(s) used in this case:
b
Please shortly describe the limitations of the tool(s) used in this case:
b
Please select the best description of how the tool(s) has been applied in management (to date): Initial phase of adoption/End user identified
Please choose the type of application that best describes the tool:
(Please choose all that apply)
Heuristic
Please shortly describe any visualisations associated with the tool:
(E.g. graphs, infographics, videos)
jn
Please shortly describe any strengths of the visualisations:
b
Please shortly describe any limitations of the use of visualisations in the case:
b
Please indicate how much time was spent with managers familiarising them with the tool before they started using it in management:
b
Could this tool be adopted for use in other areas? Please indicate how easy/hard this adaptation might be:
bh
What data would be required to use the tool in a different case/area?
b
How much time would be required to adopt the tool for use in a new case?
b

Management success: The tool helped to achieve ecosystem targets.
  Strongly disagree Neutral Strongly agreeh 
  12345N/A
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Management success: The tool was accepted by the public.
  Strongly disagree Neutral Strongly agree
  12345
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Management success: The tool was easy to implement.
  Strongly disagree Neutral Strongly agree
  12345
Please indicate if you agree with the statement: