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Conviction is everything

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Last week, one of my close friends mentioned in passing that he had bought Virgin Galactic, the space tourism company owned by Sir Richard Branson.

Since purchasing a few months back, the stock had continued to slip, and he sold his entire position. The following day the stock jumped 39% after the FAA approved its passenger spaceflight license… such is life.

To be honest, the whole conversation blew my mind. While I have no affinity to Virgin Galactic itself, I think it is fair to say that any investment in to a space exploration company is likely to be a volatile, ultra-long-term investment. In fact, I fail to think of a single investment that would require a more forward-looking investment thesis - yet he held for just three months.

As I dug a little deeper, his actions became a lot easier to understand. Having purchased the company off the back of a headline he saw online, he had no problem selling even faster at a loss. As the stock tanked, his defensive wiring kicked in, and, in an effort to protect from further losses, he sold. Seems rational, right? Many of us would have done the same simply because it's difficult to maintain faith in a company you know nothing about.

All this got me thinking; potentially, the biggest reason retail investors struggle with stock selection and even passive investing is a lack of conviction around what they hold.

Narratives are not enough

Many of the most-discussed investments or stock picks are notorious for being surface-level in nature. DIY investors will blurt their two-line quip about a particular company they have invested in, but if you go in search of some more in-depth supportive analysis, you will be left empty-handed.

The truth about modern-day retail investing: Many of the positions are populated by investors whose investment thesis is supported by little more than a tagline they pulled following an 'in-depth' three-minute Google search.

Now, I'm not saying this whimsical investment approach applies to everyone, nor am I saying that searching online for stock tips is inherently a bad thing (I do it all the time). What I will say is, this quick stock tip search needs to be the beginning of your investment research, not the end.

You can borrow someone's idea, but you cannot borrow their conviction. By simply taking another person's stock tip, you’re left with a plethora of unanswered questions; how much should I invest, at what point should I sell, what changes to the company's outlook will change the investment thesis? These are all questions you need to answer on your own.
 

Do your homework

Over your investing lifetime, major corrections will happen. Any number of random short-term events can tank a stock. When that happens, you need something to fall back on to avoid doing something you later regret.

You will never expose yourself to the exponential returns of truly innovative companies if you don't understand why you own the stock in the first place.

Not one of the Mega-Cap companies that dominate the current investing landscape achieved this status without first experiencing multiple bouts of gut-wrenching volatility.

Those who thought Amazon was just an online bookstore lacked the conviction to hold as the stock plummeted over 90% after the dot com crash. However, for those who had the iron stomach and foresight to see the company's true potential, the rewards were life-changing.

This works in the opposite direction as well. Those who thought Netflix was simply a DVD vending machine company sold their shares as the company jumped in value, while those who held their conviction since IPO multiplied their investment by 500 times without even having to lift a finger.

In short, you need to do your own homework if you want to be a successful active investor. Investing in every tip you see online may work over the short run, but without an understanding of what you own and why you own it, you are in for a painstaking investment experience laced with perpetual uncertainty.

To learn how to generate conviction in your investment decisions visit www.theislandinvestor.com.

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What is an Engineering Statutory Inspection?

By John Healy of Healy Insurances Equipment owners and managers can typically have a diverse, complex and large number of plant and equipment types under their direct control and or supervision. With this comes the legal responsibility to ensure it is safe and that the necessary Health and Safety requirements are being satisfied. An Engineering […]

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By John Healy of Healy Insurances

Equipment owners and managers can typically have a diverse, complex and large number of plant and equipment types under their direct control and or supervision.

With this comes the legal responsibility to ensure it is safe and that the necessary Health and Safety requirements are being satisfied.

An Engineering policy will ensure that you satisfy the requirements of the Health, Safety & Welfare at Work legislation. Here is a brief outline of some of the most common plant and machinery that falls under this legislation.

* Forklifts and teleporters should be inspected and certified every 12 months
* Vehicle lifting tables should be inspected and certified every 12 months.
* Lifting plant such as hoists and goods/passenger lifts have an examination frequency of six months. Other machinery which are not lifting machines but have a lifting function, for example manual pallet trucks, excavators etc also require inspection under the health and safety acts.
* Steam boilers, steam receivers and air receivers should be inspected and certified every 26 months. Hot water boilers and café boilers should be examined every 12 months.

As you can see there are many sectors that are impacted by this legislation from construction and manufacturing to the hospitality industry, agri sector and motor industry. It should be emphasised that if there is an accident involving an item of plant an up to date certificate will be requested by both the Health and Safety Authority (HSA) and the liability insurers. It is also vital to say that routine servicing of plant and machinery does not replace the legal requirement to hold up to date certification.

There are a wider range of insurers and inspectors who offer this service. It is crucial to get the best possible professional advice as policy wordings and covers can differ greatly.

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What to look out for when viewing second hand homes

By Ted Healy of DNG TED HEALY After spending so long saving for a mortgage and filling in countless application forms, you are now ready to begin your house hunting in earnest. Set yourself a budget and have a look to see what is available in your desired locations within that budget. Viewing appointments can […]

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By Ted Healy of DNG TED HEALY

After spending so long saving for a mortgage and filling in countless application forms, you are now ready to begin your house hunting in earnest.

Set yourself a budget and have a look to see what is available in your desired locations within that budget.
Viewing appointments can be arranged via a telephone call or a simple email to the selling agent. When making the appointment make it clear that the mortgage is in place and you are ‘ready to go’.

This week we will deal with viewing second hand homes and what to look out for on that first property viewing.

When you arrive at a house, you’ll get a general feel outside of how well it’s been maintained. Arrive early and study the exterior of the property before going in, and have a glance at neighbouring properties. This will help you to get your bearings before continuing with the viewing.

If viewing an older house, a musty smell is the first red flag for signs of damp. Also be wary of the smell of fresh paint; was this done to simply freshen the property up or what is it covering up? Is paintwork bubbling or flaking?

Take note of any wall cracking; hairline cracks in walls and ceilings are generally fine, but if you can spot a crack from the other side of the room, then it’s probably big enough to be concerned about.

In older houses, take a good look at windows and roofs. Window frames can slope downward if there are poor ground conditions underneath, and the roof of the house can sag in too.

Is there room to extend? If you are lucky enough that there is have a look for external manhole covers; it gives a good indication of the drainage and pipe layout which may complicate a future extension.

Don’t be afraid to ask the nosy questions; why is the house for sale? How long has it been on the market? How long have the current owners resided there? Has the house been rented out frequently? How many times has it changed hands in the last decade? Have there been any refurbishments? Has it been rewired/replumbed? Who are the neighbours? What is included in the selling price?

It is a good idea to take photos (with the agents consent) or videos as this will help you remember the property after you have returned home.

And finally, don’t be afraid to ask for more time. Spend as much time as you think you need to and don’t hesitate to request a second viewing.

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