There's a pattern emerging in my writing.
A pattern that, I think, holds an important key to good investing.
Let me explain.
See, most Monday mornings, I sit down at my keyboard to type up an article, and my head is awash in potential topics.
But not the usual suspects.
See, in the 'serious' financial business, Monday mornings are supposed to be all about the week ahead.
They're supposed to be helping traders get ready for the trades they should make.
To assess the latest news out of the USA, UK, Japan or China.
To arm you with all of the information you need to be a great trader.
Don't get me wrong… that stuff isn't completely useless.
For example, this week's interest rate decision and GDP figures are important economic signposts:
The cost of debt is important — for households and for businesses.
And economic growth — especially the staggeringly quick recovery from the COVID recession — will give us a sense of what we're doing with our cash. And that matters, especially for businesses relying on discretionary spending.
But — and here's the secret — none of that needs to be 'prepared for' — at least, not if you're an investor (as opposed to a trader).
Me?
I've continued to invest regularly and steadily, regardless of economic circumstances.
That's served me pretty well.
And I think I've sold maybe precisely one company's shares in the last few years.
(I could be wrong, but I can't remember the last time I sold before that!)
It is, to use Warren Buffett's phrase, benign neglect, bordering on sloth.
And it suits me just fine.
Instead, I spent the weekend at my young bloke's soccer game. At a cafe. At my mother's place for her birthday (Happy Birthday, Mum!). On Weekend Sunrise and Nine's Late News. And chopping a few months' firewood.
See, not only is that far more productive, useful and balanced than hoovering up finance 'news', but it's also likely more profitable.
Do you know how many day traders lose money? According to at least one research paper I've read, close enough to 9 out of 10.
Do you know how many long term investors (that should be a tautology) lose money? I don't know, but given the ASX hit a new high just last week, I would suggest not many… if they do it properly.
And that last phrase is important. I am absolutely NOT telling you that you can't lose money as an investor. You absolutely can, especially if you do it badly!
But if you diversify properly…
… and buy regularly…
… and sell rarely…
… and buy quality businesses…
… and let time do its work…
… you're seriously increasing your odds of making money.
Again, let me be very clear: you can still lose money.
I don't want anyone to go away from this under false pretences.
But it is my humble assertion that the more of the above that you do (diversify, buy, don't sell, quality, wait), the better your odds.
Indeed, the average 'normal' investor, like you and me, has one pretty important advantage over the spreadsheet jockeys.
Famed US fund manager (and author of One Up on Wall Street) Peter Lynch called it 'buying what you know'.
Motley Fool co-founder (and Chief Rule Breaker) David Gardner talks about 'living a more interesting life'.
I like the simple phrase — which applies to much more than investing, of course — 'not everything that can be counted, counts, and not everything that counts can be counted'.
Trying to trade charts — and beat the other guy trying to do the exact same thing… let's just say that's a reasonably one-dimensional game.
And if you're not the best at it, you're like the weekend hacker challenging Phil Mickelson to an 18-hole playoff.
For money.
And if you only see investing through the spreadsheets and financial reports… well, not only does the same apply, but you're missing the bigger picture, too.
Apple Inc's (NASDAQ: AAPL) financials are wonderful. But they're the result, not the cause, of its success.
The fanaticism of Tesla Inc (NASDAQ: TSLA) customers is a helluva thing. That's not in the spreadsheet, either.
Oh, you can find clues to both… but only if you are looking for them in the first place.
—-
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Okay, back to my article…
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Closer to home, think about the consumer uptake of Afterpay Ltd (ASX: APT).
The recovery of domestic tourism.
The continued rise of cloud accounting platform Xero Limited (ASX: XRO).
More than that, though, think of what you're missing if you're only looking at share prices.
Tech in particular, and growth companies in general, have taken a beating over the past few months.
I don't do predictions, but I do think the market has dramatically overreacted and is leaving many companies for dead that will recover, like the proverbial phoenix, from the ashes.
You won't find those ideas using charts.
You won't find those ideas using only spreadsheets.
Which companies?
Here are three, from our three 'entry level' services.
I asked Kevin Gandiya, our Director of Research and lead advisor at Extreme Opportunities for his idea:
"Bigtincan Holdings Ltd (ASX: BTH): a small Australian software company that is growing in the US market. Recommended twice at Extreme Opportunities. Both recs are up over 100% but in that time it's been a very volatile ride with drawdowns as large as 48% in 2018 and 60% in 2020. Currently, it is down 32% from its all-time high."
And Ed Vesely, lead advisor of Dividend Investor, for his, too:
"Bravura Solutions Ltd (ASX: BVS): an enterprise software business serving customers in wealth management, life insurance and funds management."
Its shares are trading about one-third below their 12-month high.
And as I run Share Advisor, I didn't have to go far for mine.
It's a company I own, Kogan.com Ltd (ASX: KGN), which got whacked when investors decided that post-COVID, consumers would stop shopping there, and then whacked again when the company realised it had too much inventory. But I think Kogan's future is bright. And, down some 60% from its highs of just 6 months ago, I reckon today's price is attractive.
So there you go: three companies, one from each of our entry-level investment recommendation services.
Of course, that's not a diversified portfolio. Don't just own three stocks. And, as I mentioned above, think long term.
But those might be a good start.
History is littered with wonderful investment opportunities that sometimes take months or years to play out.
You often won't find them from share price charts. Or from spreadsheets.
There's a reason why many creative people have their best ideas in the shower — when you let your mind turn off for a bit, the work of the subconscious takes over.
So, go and chop wood. Go to a soccer game. Go shopping. Or go for a walk.
You won't find that advice in most investing textbooks.
And I think that's precisely why it's so valuable.
Fool on!