Does luck play a role with investments?
‘Everything in life is luck’ – Donald Trump
The President of the United States made the above quote well before he obtained political office but it is a mantra that has seemingly serviced him individually rather well over recent years. In my experience luck is an inevitable part of any investment reality over the shorter-term as reflects a stock market which is responding to fear and greed of all market participants and not just you. After all this is what ‘luck’ in an investment context is: multiple other investors loving (good luck) or disliking (bad luck) your chosen investment(s) or an unanticipated event which has a suitably positive or negative impact.
Savvy investors acknowledge such occurrences and build two further elements into their processes. The first is patience. Not everything happens immediately with an investment idea as any individual investor – or even an investment institution – is just one player at the margin. As the expression goes ‘in the short-term the market is a voting machine and in the longer-term a weighing machine’. True value does always come out eventually.
But true value may not be a higher share price…and this is why the second aspect of building flexibility into your process matters. Events can mean changes and a cheap share can suffer a falling share price (and vice versa) if the big picture wider world and/or the small picture investment-specific world impact.
In short – over time – you make your own luck in investments by not panicking plus staying flexibile and acknowledging new insights and knowledge.
Peak earnings season is grinding closer to a close but over the next week we would highlight UK names including ITV and Royal Mail who are both updating investors with their latest thoughts. Both companies have seen their shares under pressure in the last few months and value investors will be looking at confirmation that their business plans remain on track. Meanwhile global retail spending watchers will be looking closely at the updates from Wal-Mart and Home Depot for insights.
Chris.email@example.com Chief Investment Officer Dynamic Opportunities UCITS Fund