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And whatever you
beware of the sharks in the ocean!
On which investing activities should I focus my time?
and how much time to
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
more details on the Enjoyment Factor below.
Some examples of where people spend their investing time
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.
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.
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.
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
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
How much time to spend on the different aspects of
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:
- So that we know enough about the financial instrument or asset class
in which we want to invest.
- We need to do an amount of research to identify the "right"
opportunities. This might be when choosing between asset classes, or
simply to identify the best performer within an asset class.
- 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
- In order to manage the risks, and generally look after the
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
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
Why do they do it? - The Enjoyment Factor!
Okay, so why is it that people spend different
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).
It's the journey
Another way to look at this is to think of the
"journey". Most of the people who invest in, or trade, the financial
markets are happy to learn more about the subject, and do the research
to find the investing and trading opportunities.
For those who love investing in the real estate
market, their journey includes researching locations, and proporety
opportunities, as well as the property purchase and funding. they enjoy
this activity - that's their journey.
For those who love investing in shares, their
journey might include researching the companies and the fundamentals,
while for others the journey might be studying the price charts and
looking for opportuniities based on price (eg. using technical
But remember the 80/20 rule
Here is one very important thing to remember - the
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
It's the balance that's important
Many readers will be familiar with the concept of
and yang, and the balance that this implies. And you could
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
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
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.