It is hard work being a true investor – so many things to analyse. This means you do not have time to waste on pointless activity. The vast majority of your attention must be directed to business analysis. As Peter Lynch said “Stocks are not lottery tickets. There’s a company behind every stock. If a company does well, the stock does well. It’s not that complicated.” So concentrate on what makes the company do well.
Here are a few things people waste time on
Weirdly, we had two hits of this nature in just three years. Fortunately, some of us spotted the ingredients for macroeconomic trouble from Covid when it was still pooh-poohed as a likely problem by leaders in this country, so I was able to sell shares vulnerable to recession into a sanguine market willing to pay good prices.
The second macro issue was the excessive economic stimulus from loose monetary policy and very generous fiscal policy (stuffing money into people’s pockets). All the ingredients were there for a boom, followed by inflation, and then central bank reaction. It seemed to me fairly predictable – so I enjoyed the boom with lots of equities, and enjoyed the inflation period with lots of cash so I could hunt for bargains when Mr Market was gloomy.
We are no longer in extraordinary times and so the macro side of my brain can go back to sleep – just occasionally to open an eye every now and then to see if there is anything threatening. I hope the macro peace - with normal fluctuations and concerns to be sure - continues for a couple of decades now so I can be fully invested in UK equities all the time.
The type of economics that is very useful
So macroeconomic prediction have very limited value.
But other economic data, things like what is happening to used car prices when you are analysing a car dealing chain are very useful, or what happening to the price of ethylene when you are looking at chemical companies, or to house prices if you examine a house building firms. Now those are truly valuable things to follow.
Prof Glen Arnold now offers a Managed Portfolio Service at Henry Spain Investment Services under which clients’ portfolios contain the same shares as his (write to Jackie.Tran@henryspain.co.uk)
I'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk
investing is about making the right decisions, not many decisions.