INSIGHTS
APR
29
COSTA’S CORNER
“Everyone gets so much information all day long that they lose their common sense.”
One of several great quotes by one of the most prominent authors and feminists of the early 20th Century, Gertrude Stein. Amazingly, it is more relevant now than when she wrote it in 1932.
Saying that your investment style is more rooted in fundamentals and common sense would seem a good starting point for people to discredit your approach to investing and that’s fine, it’s how I look at things and I can honestly say, I am a dying breed.
I have zero training in research and everything I have learned has been by teaching myself what works and what doesn’t work. To me, most investing is common sense.
Why invest in a company that has a stagnant stable of products and spends little on research?
Why invest in a company where management is in turmoil?
Why invest in a company when the fundamentals of the industry it is in are failing?
It takes a little legwork but pretty much every piece of information is out there, on the internet, for you to look at and digest. You don’t have to have be a CPA to understand the numbers. Just read a company’s prospectus, its annual report, and any fillings with the SEC. Google the company’s website. Research the management. If you have a brokerage account, look at the research reports that your broker has on the company. Look at old reports. See if there are direction changes. Litigations.
It may take a little time but it took you time to earn the money you are investing, take the time to research and invest.
The fallback for the last few years has been, instead of making an investment in an individual company, people invest in ETF’s. While I am not a big fan of this investment strategy, I can see why people do it. Cheaper in and cheaper out. You can trade it like a stock. Lower expense ratios. I get all that but if I do any amount of research on a stock, I want to take advantage of my idea by buying the stock, not some index that carry’s all of that company’s competitors. Why should my investment suffer because the other companies in a group don’t fare as well as the company I researched?
For example, you could have loved Apple in 2010, but instead of buying Apple you bought an ETF that had a decent weighting of Apple but it also had Motorola, Nokia, Samsung and several other telecom stocks in it. The ETF in 8 years would be up roughly 86%, not bad, but Apple is up a little over 800%. Big difference.
It’s common sense.
Another common sense approach to investing is invest in what you know, what you understand.
Using common sense and understanding the products a company produces or the business the company is in, makes investing in that company easier and a safer bet.
Why invest in a biotech company that has “unlimited potential”? That potential is usually based on five or six pieces of a very complex puzzle falling into place. How often does that happen? For every Genentech, I can name 20 Pharmablastoma Inc’s. You don’t know what they do? Turn the page.
It’s conservative I know but you are not gambling in an office pool during March Madness, this is real money and your future and your children’s future will be impacted by your decisions, use common sense.
No change to this approach either.
50% Stocks
25% Fixed Income
25% Cash
One of several great quotes by one of the most prominent authors and feminists of the early 20th Century, Gertrude Stein. Amazingly, it is more relevant now than when she wrote it in 1932.
Saying that your investment style is more rooted in fundamentals and common sense would seem a good starting point for people to discredit your approach to investing and that’s fine, it’s how I look at things and I can honestly say, I am a dying breed.
I have zero training in research and everything I have learned has been by teaching myself what works and what doesn’t work. To me, most investing is common sense.
Why invest in a company that has a stagnant stable of products and spends little on research?
Why invest in a company where management is in turmoil?
Why invest in a company when the fundamentals of the industry it is in are failing?
It takes a little legwork but pretty much every piece of information is out there, on the internet, for you to look at and digest. You don’t have to have be a CPA to understand the numbers. Just read a company’s prospectus, its annual report, and any fillings with the SEC. Google the company’s website. Research the management. If you have a brokerage account, look at the research reports that your broker has on the company. Look at old reports. See if there are direction changes. Litigations.
It may take a little time but it took you time to earn the money you are investing, take the time to research and invest.
The fallback for the last few years has been, instead of making an investment in an individual company, people invest in ETF’s. While I am not a big fan of this investment strategy, I can see why people do it. Cheaper in and cheaper out. You can trade it like a stock. Lower expense ratios. I get all that but if I do any amount of research on a stock, I want to take advantage of my idea by buying the stock, not some index that carry’s all of that company’s competitors. Why should my investment suffer because the other companies in a group don’t fare as well as the company I researched?
For example, you could have loved Apple in 2010, but instead of buying Apple you bought an ETF that had a decent weighting of Apple but it also had Motorola, Nokia, Samsung and several other telecom stocks in it. The ETF in 8 years would be up roughly 86%, not bad, but Apple is up a little over 800%. Big difference.
It’s common sense.
Another common sense approach to investing is invest in what you know, what you understand.
Using common sense and understanding the products a company produces or the business the company is in, makes investing in that company easier and a safer bet.
Why invest in a biotech company that has “unlimited potential”? That potential is usually based on five or six pieces of a very complex puzzle falling into place. How often does that happen? For every Genentech, I can name 20 Pharmablastoma Inc’s. You don’t know what they do? Turn the page.
It’s conservative I know but you are not gambling in an office pool during March Madness, this is real money and your future and your children’s future will be impacted by your decisions, use common sense.
No change to this approach either.
50% Stocks
25% Fixed Income
25% Cash