Savvy investing requires an ability to
think outside the standard market data. Certainly we can all watch the
business cable networks, read a prospectus, review stock performance, and do
all the usual things.
Why not just trust those data
providers? Aren't they reliable? Of course they are. They
have been proven effective over the years, but just as any economic statistic
passes through great analysis, verification, and review, this data can lag
behind real-time market needs.
The result is that you are responding to
what has already happened, when in real time something else is already
happening. GDP, the CPI, and any other economic indicator you care to
name are often retroactively revised as new data is solidified. Data like
these are better suited for the economic textbooks of 2025, not for your
portfolio of 2013.
So don't invest based on old news.
Look at the seeds that are being planted instead of checking the fruit as the
plant dies.
Tracking down the true future of a stock,
when you're interested in long-term holdings, also means stepping back from
processed data and looking for it right at the point of occurrence. In
other words, don't examine trends in the auto insurance business. Look at auto accidentstatistics, records of moving violations, and other publicly available data
on what Americans are doing on the roadway. Consider government sites like the
National Highway Traffic Safety Administration, to stay one step ahead of the
market data.
This type of approach can be taken with any
industry. There are all kinds of sources of data, many of them objective
enough to be trusted, and with long track records of success, accuracy, and
impartiality. If you want data, they can be found.
If you're considering an investment
in a tractor manufacturer, for example, don't just get the latest tractor
industry stock ticker. Look at trends in crop prices, exports, livestock
markets, farm credit, and all the information that feeds into Farmer Smith's
decision to purchase a tractor.
Much of this decision process doesn't require anything more than just reflecting on what we know from personal experience. We are all aware of the trends in energy-efficient lighting, so if you're looking into investments in a company that produces light bulbs, don't worry about how well they've been selling for the last five years with the old incandescent models. Investigate what their plans are for compact fluorescent fixtures, and if they don't make them, look elsewhere.
In other words, don't invest in the horse and buggy industry when that Henry Ford fellow is putting up a big building down the street.
Much of this decision process doesn't require anything more than just reflecting on what we know from personal experience. We are all aware of the trends in energy-efficient lighting, so if you're looking into investments in a company that produces light bulbs, don't worry about how well they've been selling for the last five years with the old incandescent models. Investigate what their plans are for compact fluorescent fixtures, and if they don't make them, look elsewhere.
In other words, don't invest in the horse and buggy industry when that Henry Ford fellow is putting up a big building down the street.
The important mistake to avoid is not to
become one-dimensional. Investment
decisions are only as good as the information used to make them. When
information is dated, complex, or measured over a short period of time, they
can steer you toward the wrong decision. The only way to get the best
information is to go to the source, armed with an ability to analyze data, and
get the numbers that matter.