Sweet as Pie
Jon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I remember when I was a kid, my life was consumed by sports. One day, as I was listening to sports radio, I was presented with a challenge. Pick the winner of all 15 NFL games. Whoever picked better than the NFL analyst on the station won a free dessert at Long John Silver (and I was a fan of their lemon meringue pie.) I must have been 14, but I took the challenge and was one of only four people who won a dessert. As my mom drove me to LJS for my pie, I learned a truth: it feels good to outsmart the experts.
I doubt that it’s possible to talk of the stock market without throwing in a Buffett quote. He says to get fearful when others get greedy and get greedy when others get fearful. That’s all well and good, but that would require you to make better decisions than the pros who are getting greedy and fearful. That may not seem hard, but think about it. You are being asked to be better informed skimming the highlights from the news to manage your $3,000 portfolio, then some guy who sits in an office 60 hours a week managing millions. Does that sound about right?
The point of all this is not to discourage people from investing, but to encourage sobriety in investing. We, the little guy, have to work extra hard to make sure we are making sound investments. We can’t get lazy. For example Cellcom Israel (NYSE: CEL) attracted many investors for their large dividends. That’s all well and good, but this wasn’t a get it and forget it stock. If you missed the events unfolding (like yours truly) you weren’t aware of the legislature changes that caused this stock to tank. The informed sold. The ignorant plunged with it. I hope that my point is already made without having to be the 10 millionth person to make a point using the investing in the whole Facebook (NASDAQ: FB) IPO $100 billion valuation fiasco.
Adding a sober tone to the investing conversation doesn’t mean that beating the pros is an impossible task. It can be done. One of my favorite stocks ever was Marvel before they were bought out by Walt Disney (NYSE: DIS). I can remember reading some analysts talking about the bonehead move for Marvel to start their own studio. I remember reading movie critics saying Iron Man would never catch on. Well I ignored the experts because I thought that the move was genius. I had a small holding in Marvel, but I tripled down. Shortly after the Iron Man release, Marvel skyrocketed to a fantastic return when Disney saw the value and bought them out. (Although I still wonder how much higher the stock would have climbed without the buyout). I could taste lemon pie as I savored beating so many so called experts at their own investing game.
The stock market isn’t guessing. It’s educated guessing. Guessing because no one knows the future except God Almighty. Educated because that’s how investing has to be done. Due diligence is required if you are going to pick winning stocks on a consistent basis. But even once you have a position, diligence is still required to stay in the know with what is happening with your business. It’s hard work, but it can be done and it’s worth it. Trust me, nothing is sweeter than winning.
thequast loves picking winning stocks but doesn't have a flawless track record. He owns shares of Cellcom Israel. The Motley Fool owns shares of Walt Disney and Facebook. Motley Fool newsletter services recommend Facebook and Walt Disney. 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.