Investing is a subject as far removed from Bear Grylls’s survival escapades that you could possibly get – Oh no it isn’t.
Investing and Bear Grylls?
I love watching survival shows on TV. Bear Grylls immediately comes to mind as the original and still the best. Can you imagine him dropping by for dinner? No doubt arriving by helicopter. And certainly not wanting to land in your neighbor’s herb garden, he would probably abseil down and plum- met the last 10 feet straight into your pool.
And dinner would be a very simple menu. A plate of various mosses from the backyard, the contents of the ‘bug zapper’ and the tipple of choice, some freshly decanted urine.
Although I am pretty certain Bear would ‘self-rescue’ quick smart, to the nearest kebab shop. once he had seen the menu!
Thankfully, the ‘survival genre’ seems to be showing no signs of slowing down, with a proliferation of these shows. There’s one in particular called ’Naked and Afraid’ which matches a male and female survivalist together in pretty hostile terrain.
As the title suggests, they are stranded with nothing, and that means no clothes. Yes completely naked. And perhaps dropped in the Amazon rainforest, and told to survive for 21 days. Can you imagine the insect bites!!
Anyway, whichever show I watch, each survivalist participating uses their accumulated skills to enable them to survive and get out of trouble in a wilderness environment.
Importantly they all seem to have one common survival technique, no matter what the terrain. The very first thing they do is always to look at the surroundings they find themselves in. Their first
thought is always to find a vantage point that will give a 360-degree view. This allows them to see all possible obstacles and issues that could face them in their bid to ‘self-rescue’.
And it is from this examination that they formulate their plan of action. I have never seen anyone, on any show, just meander off into the jungle in the hope of rescue.
This wilderness survival technique is exactly what all investors should be doing in their quest for financial survival through investing.
Investing Survival
As an investor, you’re faced with an environment that changes constantly. Unlike wilderness experts, your surroundings consist of the many elements that influence the success of an investment strategy.
Unfortunately, we cannot just clamber up a tree to reconnoitre. Rather we need to research and di- gest information to form an opinion of the environment. This information needs to give us a picture of the dangers and opportunities surrounding us and how best to cope with.
So for investor’s, it’s not the wild animals or river beds to look out for, but the different business cycles, economic signals, and trends.
But like the wilderness survivalist, you really do need to become educated about the environment and understand not only its peccadillo’s (look that word up!) but also the major driving forces that constantly shape its future.
This research stage provides an important foundation of knowledge when investing. And as such, you can’t shirk this part. It really is vital to have a thorough understanding of your investment surroundings.
Sadly it is at this point that a great many investors have come to grief. Attempting to conquer the world of investing without knowledge or skills is just as stupid as thinking you could escape the Amazon jungle after watching 2 episodes of Man V Wild!
And yes, like learning any new skill it is time-consuming, sometimes confusing and initially, painstakingly boring, but your efforts will certainly be rewarded I can almost guarantee it.
Over the years I have seen many occasions where just a bit of research and some basic knowledge would have saved people from what became major investing blunders.
Alternatively, don’t go to the other extreme and create a feeling of “analysis paralysis”. Too much information can restrict you moving onwards and hopefully upwards.
Remember when Bear Grylls climbs that ‘Boab’ tree on the African savannah he doesn’t expect to view a Vista where he can find every danger. He certainly won’t be pointing at each rock and yelling out which ones have snakes or scorpions under them.
Rather he views a landscape and becomes aware of the general dangers and possible obstacles he will be heading into. The exact nature of which will be revealed when he actually gets to them.
So what sort of information are we looking for to help our investing?
Government policy and Investing
As investors the need to understand, and stay in tune with Government policy is vital. A sudden sweep of the legislator’s pen and your shares could suddenly be worthless or become the next big thing.
Many industries employ lobbyists to preach their case or change the minds of legislators to a more favourable stance. Obviously, they do this with varying levels of success, but it certainly highlights the importance of favourable Government policy for many industries. Get familiar with the industries you are investing in.
Do some searches for any legislation changes impending or proposed, that might affect your investing. Usually, a lot of this information will be reported in the newspaper so keep your eye out for anything that you think is important.
Also, don’t forget to watch for any Government instrumentalities reporting issues in regards to any of the companies you are invested in. Trade and consumer practice breaches, whether real or implied, can inflict a great deal of reputation damage to a company’s share price.
This type of issue is great fodder for the press and will be reported immediately so it is just a matter of keeping watch. A wonderful example of this is the banks and their financial planning scandals.
Technology and Investing
As you will be no doubt aware, technological advancement is happening at an absolute unbelievable pace. And with this change has come business models that even 10 years ago would not have even been thought of.
Unlike the ‘tech boom’ at the start of 2000, which was built mainly on hope and imagination, this time we have tangible technological advancements changing every aspect of our lives.
Ironically, these advancements are actually creating a double-edged sword for long-term investors. On one side, there is the creation of whole new industries, but the other has many established business sectors decimated by disruptive technology.
Think Uber and the taxi industry.’ Just 10 years ago the purchase of a taxi plate was in the $450k area and was viewed as long-term, cash generating, rock-solid business. Today, you can’t give these plates away, and in fact, Government’s have to compensate long-suffering taxi owners to rationalise this ailing industry.
And then the mobile phone, a device that has revolutionised society by providing a limitless deal with just about every product and service provider on earth. It has become the absolute centre of our actions and as a result, businesses who are failing to completely adapt to this channel, will stunt and eventually stall their growth prospects.
Long-term investors need to be very wary of companies going through a slow ‘death’ so to speak. Corporations who lack innovation and a wish to change can leave investors just like the ‘frog which is put in cold water and slowly brought to the boil’.
It takes a while to realise what is occurring and when you do, it is too late. Keep your eyes ‘peeled’ and review all your investments in terms of changing technology regularly.
Being a long-term investor means you need to be incredibly open to innovation across all industries. Now I am not advocating jumping aboard the ‘next big thing’ every time you hear about it, rather be alert to the changing environment across all industries and try to be perceptive about new processes and products.
Ensure that the companies in your portfolio are keeping up with advancement through a healthy amount of research and development (R & D) Companies who are not committed to innovation will certainly be paying the price.
Keep in tune with public perceptions as well because all companies respond to demand. Make sure you watch for trends, fads, and anything new and interesting.
Economic factors and Investing
One doesn’t need to be a Keynesian scholar to understand the effect economic conditions will have on share investments. Recessions, booms, high unemployment etc will all have some flow-on effect on any investment portfolio.
Every company is anchored to consumer behaviour, either directly or indirectly and economic events altering behaviours will have an impact.
For example, a downturn in consumer spending will have an immediate effect on household goods retailers. It also creates issues with mining companies as demand for raw materials to manufacture household goods, will also fall.
Stay tuned to general economic forecasts and acquaint yourself with the variety of economic indicators that are produced. Figures such as inflation, GDP, trade surplus/deficits et al. You just need to build a reasonable understanding of the major inputs that can steer economic behaviour.
Understanding these indicators will also throw up some real opportunities in terms of investment cycles beginning or ending. For example, interest rates starting to go up will mean the beginning of tighter spending for consumers. It certainly won’t be immediate but it is a good sign of things to come.
Again, you are aiming for a familiarity with economic terms, the causes, and effects etc. Newspapers are always a good source as well as the various, online publications
Have a look here at the Resources section as I have put some links that will certainly get you started
You need knowledge about all the factors impacting either directly or indirectly on companies you are investing in.
Vigilance is the key to successful investing. Many events have either a limited effect or no effect at all on investments. But it is prudent where possible, to prepare for eventualities before they eventuate.
A fantastic book to start you economic knowledge with is Freakonomics- A Rogue Economist Ex- plores the Hidden Side of Everything by Levitt & Dubner. A tremendously interesting, amusing and thought-provoking book. You will love this.
Finally – Investing Environments
The environment surrounding your investments will play a huge role in your investing success. Get to know it, follow when it changes and above all, don’t ignore it.
Alright, time to climb that tree with Bear!
