‘STAY AHEAD’: The mark of good investors

Mutual funds have been the more popular of the two types of CISs, constituting more than double the number of unit trusts.
Kwadwo Acheampong

For many people, skating may seem such a huge challenge. And, ice hockey is probably not a sport some of us would be found playing, ever! It is one thing gliding effortlessly with blades on ice but, obviously playing the game requires a lot more. It is a very physical contact sport, with real meaning to the word ‘contact’.

It is played by two opposing teams with six players each. The players use sticks that are long and slender with a flat extension at one end. The ‘ball’ is like a thick disc, made of vulcanized rubber. As is the case with most sports featuring two opposing teams, the object is to get the puck into the opponent’s goal, past the posts and goal-keeper.

Courtesy: DW

The game is a full-contact sport. The risk of injury is a very present danger to all the twelve players and the two to four on-ice officials. Lacerations, concussions, contusions, ligament tears, broken bones, hyperextensions, and muscle strains are injuries that can, and do occur.

These arise from the speed with which players move (30-50 km/h), contact with skate blades, hockey sticks, high-impact body contact and fast-flying pucks. Additionally, players often get involved in on-ice fights which are enthusiastically cheered by spectators.

Indeed, the game has ‘enforcers’, players whose unofficial role it is to, as it were, foment trouble and make the game difficult for opposing players. Tough game, very much like a competition of gladiators in a Roman amphitheater.

Arguably the greatest players of the game ever, Wayne Gretzky spoke about what has set him apart. He stated simply, “I don’t go where the puck is; I go where the puck is going to be!” Amazing! Wayne anticipates where the puck is likely going to be and gets there first. That way. He stays ahead of the game and can dictate it.

The best business people, investors and analysts are those who can go where the puck is going to be. They anticipate the market and take a stand on where they believe the market’s direction is. They are not market followers. Rather, they are leaders and makers in the market.

Anticipation is key!

Anticipation is guided by strategy and careful study, using a number of techniques to understand market trends. Technical traders often use the moving average convergence divergence (MACD), the relative strength index (RSI), stochastics or the commodity channel index (CCI). They would incorporate recognizable chart patterns that have occurred in the past with a certain measured result.

Trend analysis is not new to most guys and it is learned ‘on the job’. When Kwaku first met his wife, he knew this was a great opportunity and he knew he had to make a move. However, it is never smart to jump into the water with both feet. Is it? He first got talking with her, light-hearted chatter, throwing in teases to find out how she would respond. He applied other techniques and gave them time to work out. The idea was to get to know what she would be pleased with and what she wouldn’t take.

Kwaku’s technical analysis was more qualitative than quantitative. No moving averages, no candlesticks. His careful study of trends, reactions, peaks and troughs helped him anticipate ahead of the ‘market’. When he knew the timing was very likely right, he didn’t hesitate, go round in circles not beat about the bush. He took a position and laid down his cards before her. Like they say, the rest is history!

The mark of a successful investor is capital gains. A good return on investment justifies the decision to invest. A good investor knows the time to invest or to pull out of one. A good investor keeps an eye on current happenings in the market. Constantly, also, a good investor updates his/her knowledge about trends in the market with relevant information. The right information given in a timely manner is critical. With these, the investor can decide it is time to buy, sell or hold on to a position in the market. These would most likely lead to comparatively high return and avoid investment losses. 

What Make Good Investors ‘Good’

What does it take to be a good investor? There are a number of characteristics we would associate with a good investor.

Firstly, good investors plan. There is method and reason behind his/her every decision. The objective of the investor is clear, as is the strategy to adopt to attain the objective. We can have for our objective financial security in pension. Otherwise, we may invest towards home ownership, expansion of our business or for our children’s future education.

Secondly, knowledge is crucial. A good investor carefully studies the market with the view to understanding it, knowing what drives it and anticipating its direction.

Thirdly, managing risks is very important. A good investor identifies risk elements and builds a selection of investments in different assets or securities. Diversification should be seen in the investment portfolio.

Fourthly, it is important to stay the course. Good investors stick to their plans and, though them may review and correct certain positions, they continue to execute according to the overall plan or strategy. Calmness and patience are required.

Successful investing is purposeful, for the long-term. Speculators, on the other hand, are interested in short-term. Mark Twain, American author of several novels, including “The Adventures of Tom Sawyerr,” describes the dangers of speculation: “There are two times in a man’s life when he should not speculate; when he can’t afford it, and when he can.” An investor’s success may not be marked by the fleeting gains on the market in the short-term. Rather, his/her success is adduced from satisfactory returns over a number of years of investing, usually in more than one sector.

The market consists of many sectors and even more securities. It is important that, to be successful, we must know our level of competence and invest accordingly. There is no sense in investing in an area we don’t understand well. The risks may not be fully appreciated for adequate mitigation.

Returns May Vary

There are yet still a couple of things we would be better off steering away from. To make a return, we always buy low and sell high. That is market-timing. However, since the market fluctuates, a positive return today could turn out to be a loss in a short time. Again, the important thing is to have a carefully hatched out plan and sticking to the plan for a considerable length of time.

Returns may vary from day-to-day. However, if the plan is a good one and it is executed well, returns will aggregate as positive and rising. It is similar to driving in traffic and realizing that the lane next to yours seems to be making better progress than yours. You switch lanes and see that all the cars in your former lane go past you and leave you behind.

It is instructive to note that successful investors do not make emotional decisions. It is never comforting to see a drop in the value of your investments. We need to stay calm and understand that markets fluctuate daily. No need to fumble and rush to take a decision we would soon regret. Insofar as we have a plan to invest, we can stay calm and follow our plan through.

Our investing requires a plan or strategy which we must carefully consider, construct and stick to. We may use all techniques we can marshal to study trends and anticipate the most likely market moves and directions. With discipline and trust in our plan, we ought to eschew market timing and acting on our emotions to make decisions which could turn out to be counter to our plan. Considerable time will justify our plan with rewarding returns.

About the Author     

Through his writings Kwadwo has discovered his love and knack to simplify complex theories spicing them with everyday life experiences for the benefit of all. The Head of OctaneDC Research, Kwadwo Acheampong, has over a decade experience in fund management and administration, portfolio management, management consulting, operations management and process improvement. Feel free to send him your feedback on his article. Email:  [email protected]

Cell: +233244563530


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