So how do you acquire a competitive edge?
The answer is simple: you already have one. As in sports, all people have something that they’re good at. Whether it’s understanding how a store’s layout might be confusing or knowing what kind of computer games kids are playing, everyone has some kind of expertise.
As we go about our daily lives, we all have favorite activities, favorite stores, favorite brands that we use. We become experts on motorcycles, camping gear, or farm equipment. Suppose you work in a hospital; you likely have a better understanding of which medical devices are popular right now than most financial professions, because you see the these products in action every day.
Insight you achieve from your everyday interactions is often more valuable than Wall Street’s research. People know when an activity is increasingly popular, or when a company seems to be offering good value to its consumers. When Apple was able to offer the iPod at a lower price than any of the MP3 players already out there, many investing pros were skeptical—but consumers lapped it up. Offering a cheap, convenient way to listen to 99-cent songs was a winning formula.
When people focus on what they already understand, they are more likely to be able to hold on through the many ups and downs of the market. In the short run stock prices seem disconnected from a company’s success. But in the long run there is a 100 percent correlation.
Investing is a competitive activity where everyone wants to be above average. But if you use the expertise you already have, you’ll be more likely to achieve your financial goals—and have some fun along the way!
Douglas R. Tengdin, CFA
Chief Investment Officer
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