A real problem ... and a solution

The problem with investing, or should I say, investors is that we have JUST too many choices.

Can buy whatever we want, whenever we want, in whichever part of the world we want.

Can buy as little as we want or as much... up to twice our actual buying power! i.e. cash we hold.

I won't even go in to to variety of securities that can be bought - bonds, derivatives [options, futures], unit trusts, IPOs, preference shares, debentures, warrants, ETFs, REITs - and these are just in the financial markets. Other asset classes are ignored entirely.

We are only talking about common stocks bought in the secondary markets through a broker.

Even then, we could be specializing in small-cap, mid-cap, large-cap, dividend-paying, start-ups, services, manufacturing, technology, infrastructure, land development, leisure, luxury, growth, value. Even among the latter two criteria, the degrees of investment attractiveness degrees vary greatly, and are highly subjective [based on the perception and style of the investor]

And then there are strategies - approaches that we are comfortable with / are right for us - long term, short term, going long, going short, diversification, concentration, trading, holding, hedging, straddles, strangles, butterflies...

Before that, comes the analysis - technical, fundamental, qualitative, quantitative, trailing numbers, estimates, adjustments, ratios, greeks, indicators, economics [company, industry, country, global], top-down, bottom-up, competitive moats, brand strength, management effectiveness (entrepreneurial heart), government support, product longevity, ethics, systems, complexness of business / branding / product line, dependence on key executives use of technology, averages, trends, margins, volumes, broad market, inter and intra industry.

It is indeed a problem of plenty. And it is a REAL justified problem. We can get just overwhelmed.

Solution:

Let's SIMPLIFY.

We don't need to kiss ALL the girls to score. Likewise, not all the bull runs and opportunities need to be captured for us to meet our goals - beating the market, adequate returns, retirement funding, etc.

It's the law of sacrificing the too many distractions, to focus on just a few in order to take action with weight and confidence.

This confidence, at least for the individual investor, or small teams comes from in-depth and intimate UNDERSTANDING of the set of companies or an industry. Example: T. Boone Pickens, muti-billionaire, focusses ONLY on commodities - energy - fossil fuels. He built a company that sold it, and now trades it. He and his team are on the top of SUPPLY and DEMAND that ultimately dictate price - now and in the near future. He has clarity on the various FACTORS that can affect this price. Based on that, he can make intelligent, and usually correct, bets using futures contracts. He considers himself a 'fundamentalist', and his bets are 'long' term - 12 months or more.

For the essential investor, we can look at Warren Buffett. His best friend is Bill Gates, and yet he does not buy Microsoft because he does not understand it.

He focusses on aggressive companies in basic industries, which are not dependant on economic or political factors. We can do the same.

Finally, with regard to timing - many of us small investors do not buy because we wait, and wait, and wait. How about if some one told you that you could buy stocks only ONCE a year - on your birthday. You could invest up to 33% of your net worth in any one company. In that case, we would screen up to 26 potential companies (1 for 2 weeks) and study them in depth through the year to craft that 'birthday trade'.