I found it very strange on reading the financial sections of my Sunday paper recently, where there were a couple of sections from what are called stock-pickers. These are people who recommend you to buy company X shares because of this event or that trend, and that never ceases to amaze me, but it is so far off the mark I have to admit.
I realise that these people do this with the best of intentions and they are only reading the economic indicators and making their suggestions based on that, so you might get someone saying that because country X produces a lot of chips that are needed for the cars that we can’t buy, then we should invest in companies in that area. It may be that another company has changed the process for what they do and the new process is more efficient – so the suggestion then is to buy those companies shares at their current low value and then sit tight and watch them grow.
Now the first thing I have to say about this is that what these journalists are suggesting is buying individual company shares because of whatever reason and whilst they make a logical case, I would say that investors should take a step back and just have a wee think about things. First of all when you invest in a specific company you need to do a whole lot of research on that company before you invest and this could involve reading P&L’s and Balance Sheets to get a better understanding of their financial position. Secondly it could also involve reading up on their product specifications to see if you agree with what has been written. All of these take time and effort and I would say are probably out of reach of the vast majority of investors. Conclusions made also have to be reviewed at various intervals as well.
That’s why as an IFA, I always look at funds because each fund will invest in say around 50 – 100 companies, and so an investment in a fund is less specific and so carries less risk. That means that a review can concentrate on the important things like investment performance – and that’s what we concentrate on doing at MAP.
When we look at funds, we don’t really care what geographical area the fund operates in, or if it is for a specific product like technology or health, our main concern is investment performance – full stop. MAP only uses funds that have both a good long-term performance (over 5 years) and also a good short term performance (over the last 3 months) and we try hard to identify and use consistent funds that reflect BOTH of these.
The final thing to remember when you invest money is that you can be guaranteed that everything WILL change, so you need to be flexible to adapt your investments to changing circumstances, and at MAP that means continually monitoring investment performance – long term and short term.
Research is the key – and you need to do this repeatedly
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