Investing Success Depends on You
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“The investor’s chief problem -- and even his worst enemy -- is likely to be himself.”
It’s not recessions, unscrupulous bankers or even nontransparent business practices what should concern investors the most. The biggest threat to your financial well being, my friend, is no other than yourself.
Fortunately, not only for their mistakes are investors responsible, the same goes for making the right decisions and choosing the best companies to invest in. Contrary to generalized opinion, I believe there has never been a more interesting time to be an investor. For better or for worse, investors have now much more possibilities and flexibility to implement their strategies.
Information has never been so abundant and easy to access as it is nowadays, education about personal finance and investing is widely available for those interested in the topic and willing to do the learning effort. You can access financial statements, recommendations and all kind of relevant news about companies in almost no time and no cost.
The technological revolution has also created many companies which have a tremendous potential to reward investors in an extraordinary way over the long term. Apple (NASDAQ: AAPL) for example is the biggest company in the world, and last quarter the company reported a 88% unit sales increase in iPhone and 151% increase in sales of iPads, which produced a 94% growth in net income versus the same quarter of the previous year. If the Cupertino giant wasn´t such an innovative company making the best use of technological advancements, those kinds of growth rates would be impossible for companies of this size.
The other side of the equation regarding the effects of new technologies on our investments would be the danger of investing in companies like Facebook (NASDAQ: FB), but nobody was forced to do so. Those who paid a stratospheric price for shares of a social network only because they knew it was popular made a huge mistake, but it was their own mistake. Who knows, maybe the company will find a more sustainable way to generate profits, and with more than 900 million users this could still be an opportunity in the future, especially if bought at much lower levels.
It´s not only about technology, of course, considering our current environment is quite shaky and uncertain regarding global economic conditions. Times have been much better in terms of economic growth in the past, and there are many structural problems in developed countries which need to be fixed. This will probably generate higher levels of volatility and uncertainty in the future, but that also brings opportunity.
Warren Buffett has delivered extraordinary long term results for shareholders in Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) by capitalizing temporary price decreases to acquire wonderful companies at undervalued levels. Economic fluctuations create excessive movements in stock prices, and that can be uncomfortable for investors, but at the same time it can be a very fertile source of investment opportunities. Companies like Berkshire will continue increasing positions when economic uncertainties create opportunities, and intelligent investors should do the same with their own money.
Many fellow investors complain about the unethical practices of companies like Goldman Sachs (NYSE: GS), in which high level management usually puts their own greed before the interest of their clients or shareholders. I am the first to agree on the fact that Wall Street needs to start working harder on ethical issues and transparency, but that doesn´t change the fact that investors should never avoid their own responsibilities when dealing with this kind of institutions.
You can make your own investment decisions using low cost brokers and following independent advice from an enormous variety of sources. Even if you are a client of Goldman Sachs, nobody is forcing you to buy the assets they are recommending, especially when those products are hard to understand like in the case of complex mortgage linked securities or assets involving combinations of derivatives. Shares of high quality companies or diversified low cost ETFs will always be available as a convenient alternative for smart investors.
The bottom line is this: current times are extraordinarily dynamic in terms of technological advancement, economic change and Wall Street behavior. This provides enormous opportunities to make – or loose – money in the markets. Now more than ever, an investor´s worse enemy – and best friend – is his own behavior.
acardenal owns shares of Apple. The Motley Fool owns shares of Apple, Berkshire Hathaway, and Facebook. Motley Fool newsletter services recommend Apple, Berkshire Hathaway, and Goldman Sachs Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.