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Balance the time
on research and investing

How much time to spend on research and investing tasks?

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On which investing activities should I focus my time?
and how much time to devote?

Have you ever noticed that across the broad range of investors and traders, some of them spend large amounts of time on an activity that you might find very boring or not useful? Following are some of the areas where many people tend to focus.
But why do they do it? - Partly because of the Enjoyment Factor!
See more details on the Enjoyment Factor below
.

Some examples of where people spend their investing time

Fundamental analysis - Have you ever noticed that some people spend more time on fundamental analysis than other people? Some investors spend many hours pouring over company financial reports, massaging the numbers and plugging the details into a spreadsheet model. Some people will argue that a lot of this activity is not very fruitful.

Property research - Some people spend exorbitant amounts of time researching the property market, looking for the next geographic hot spot, visiting property auctions, or attending seminars to pick up the latest tips. There is plenty of information in the weekend newspapers about the latest ads, locations, strategies, tactics, financing options, locations, specialists, and more.

Share market penny dreadfuls - Some people really enjoy trolling through the very cheap stocks on the share market, in the hope of spotting the next high-flying performer. These stocks are dirt cheap, and could triple in price over night (but they can be illiquid and difficult to sell in a hurry). Nonetheless, many people spend a lot of time researching the available stocks.

Focus on health care stocks - Many investors like to focus on stocks in a particular sector such as health care, or bio-tech. Many people do this because they like reading about the activities of these companies in preference to the activities of mining companies, and materials companies.

Stamp collecting, art works, antiques and other collectables - Many investors like to spend their time researching collectables - studying the specific characteristics, following trends, meeting with fellow collectors, and looking for something that will hopefully increase in value.

But why do they all do it? - it's the Enjoyment Factor*


How much time to spend on the different aspects of investing?

When investing, we want to be successful. Why else would we do it? (Just for the enjoyment?) But to be successful, there are a number of things we ought to spend some time on:

  1. Education - So that we know enough about the financial instrument or asset class in which we want to invest.
  2. Research - We need to do an amount of research to identify the "right" investment opportunities. This might be when choosing between asset classes, or simply to identify the best performer within an asset class.
  3. The purchase and sale - Depending on the chosen asset class or financial instrument, there might be some amount of time required to actually make the purchase, and then the sale at a future date. The quickest investment is probably an online purchase/sale of a parcel of shares, which can take only minutes or less, while the process of purchasing (and selling) property can take many weeks or months (or even longer).
  4. Monitoring - In order to manage the risks, and generally look after the investment, an amount of time is needed to monitor the investment. A simple investment in bank term deposits will require some amount of time to monitor, in case the economic climate changes significantly and a better alternative might become available. But close to the term deposit maturity date we should be looking for the next best possibility to roll-over the funds and avoid the default offering.

So, how much time should we spend on each of these activities? Unfortunately there is no right answer to this. It depends on a number of things, including the Enjoyment Factor.

The *Enjoyment Factor

Why do they do it? - The Enjoyment Factor!

Okay, so why is it that people spend different amounts of time on different aspects of investing research and activity? It basically boils down to the amount of enjoyment that is derived. For many people it is somewhat like a hobby - something that they just enjoy doing. For the lucky people in this world their day-to-day job might also be enjoyable (but not for many people).

But remember the 80/20 rule

Here is one very important thing to remember - the so-called 80/20 rule. That is, in general terms, it might be true that we can achieve 80 percent of the desired result with only 20 percent of the effort, and that putting in the extra 80 percent of the effort might fine tune the outcome by only 20 percent. At the end of the day, in all honesty, is it really worth the extra effort to strive for the 100 percent perfect result? Or is the 80 percent perfect result going to be a good outcome?

It's the balance that's important

Many readers will be familiar with the concept of yin and yang, and the balance that this implies. And you could consider this when thinking about what to do in our investing activity, and how much time to spend on each aspect of the activity.

At the end of the day, one of the things that is very important is our own personal enjoyment and satisfaction. There is not much use slaving away on an activity that we don't enjoy, simply to get ahead. Sadly, many people do that for their day-to-day job. But they don't need to also do it when it comes to their investing.

So, it is important to invest in a manner that is enjoyable, so that reaping the rewards will be enjoyable.

And don't forget to see Brainy's Share Market Ready check list.

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