Investment Strategy

So what exactly is this raging bull’s investment strategy made up of? Common sense. My investment strategy has, and will always be, governed by one thing – common sense.

All investment and financial decisions need to be made using common sense and logic. Too many investors rely on prefabricated, rigid, and highly technical investment strategies and tactics to guide their investment decisions. Is there anything wrong with that? Certainly not. But in doing so, I feel investors lose sight of the big-picture and miss opportunities by focusing in on some vital statistic or number.

stocks.jpgLet’s take investing in stocks for an example. Now I’m sure there are tons of investors out there who would argue with me until they’re blue in the face that a certain statistic or ratio or set of numbers is the most important consideration for determining a winning stock from a loser. But the fact remains that stocks exhibit a random walk (i.e. are unpredictable in nature). Financial economists and statisticians who have studied stock price movements have concluded that prices wander randomly, virtually equally likely to offer a high or low return on any day, regardless of what has occurred on the previous days. This is the primary reason why fund managers and other Bay/Wall Street professionals can’t beat the S&P 500 consistently. As a friend once told me, “You can study economic theory and financial data every day for your entire life and still not be able to predict what will happen in the marketplace tomorrow.”

So what can be inferred? Investing is an art, not a science. If it were, we would all be rich (and I wouldn’t be writing this blog or going to university for that matter). In addition, to beat stock market averages in this world, one will often have to ignore past performance (typically what financial analysis is based on) and instead use logic and creative thinking. One must learn not to invest where the market has been, but to invest where the market is going (even if that means entering a sector no one likes at the moment).  

With all this in mind, my approach is simply to:  

  • Buy when it’s time to buy (low)
  • Sell when it’s time to sell (high)
  • Go long when it’s time to go long
  • Go short when it’s time to go short
  • Look for macroeconomic trends, around the world
  • Look for consumer trends, around the world
  • Take smart risks
  • Avoid what I don’t know or understand
  • Observe, listen, learn, then act

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“There’s always a bull market somewhere”

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