“Do you recommend any books to read?” “What is your source of financial information?” “What ratios do you use to look for stocks?” In the past, I have gotten many questions like what you see above. For me, the questions represent a variation of the ultimate quest to answer a single query: “What is the secret sauce to successful investing?” Unfortunately, there is no secret sauce. There are no magic beans, silver bullets or secret (kung-fu) books to investing either. But fear not, Foolish reader. As a Foolish investor, I believe that there is one advantage that surpasses all others…
“Do you recommend any books to read?”
“What is your source of financial information?”
“What ratios do you use to look for stocks?”
In the past, I have gotten many questions like what you see above. For me, the questions represent a variation of the ultimate quest to answer a single query: “What is the secret sauce to successful investing?”
Unfortunately, there is no secret sauce. There are no magic beans, silver bullets or secret (kung-fu) books to investing either.
But fear not, Foolish reader.
As a Foolish investor, I believe that there is one advantage that surpasses all others and it is the subject of this article.
A Motley investing view
At the Motley Fool, being Motley – in all aspects, and especially in investing – is a core value we hold dear. We believe that every Fool can have their own unique interpretation of investing (though it has to be something that’s based on the fundamental reed that stocks represent part ownership of a business).
This could mean an investor choosing to lean more to income investing while another preferring to adhere to the venture-capitalist approach of growth investing.
But in whatever investment approach you choose, there is always something to learn from other approaches.
The growth investor can stand to learn more about the nitty-gritty details of valuing a company. Reversely, the value investor could learn to supplement his or her thoughts on the concept of a margin of safety by thinking like a growth investor and considering the opportunities a company has to grow in addition to the reasoned probability that it will be able to win a significant share of its market opportunity.
After all, as Warren Buffett would say – value and growth are joined at the hip. There is little need to remain fixated at the extreme ends of any investment approach.
The genesis of the Motley view is what I attempted to portray in my on-going series of articles on how different investors may view the same company. With each company profiled, I try to provide a view from the perspective of an income investor, a value investor, and a growth investor.
Here’s some examples of the series for your perusal:
- Venture Corporation Ltd (SGX: V03) – here
- Starhub Ltd (SGX: CC3) – here
- Super Group Ltd (SGX: S10) – here
To be sure, a Motley investment view does not have to end here. We can stand to learn from people in the industry we are interested in, the experience a consumer has with a company’s product, or simply investing experiences from others.
Everyone has a view to offer which we can potentially learn from and all we have to do is listen.
Things we don’t want to hear about
The vast majority of investors (myself included) are susceptible to confirmation bias – or the act of “starting with an answer and looking for evidence to back it up.”
This rampant behavior often worsens when we have our own money invested in a company. With our own money on the line, we are even more motivated to want an investment to work out right and in the process, it may be easier for us to fall prey to confirmation bias.
There is a big downside to this behavioural quirk. If we’re not careful, we may be so convinced with our investment thesis about a company that we would brush over facts which we do not agree with even when they are really important and highlight mortal risks about the investment that we’re about to enter.
By learning to put all the brutal truths on the table, we stand a better chance in coming up with a more robust investment thesis for a company and also to steer clear of potential time bombs.
As an example, I own shares of vehicle inspection and testing services provider Vicom Ltd (SGX: V01). But despite that, I felt comfortable writing a bear thesis for the company in The Motley Fool’s on-going Tug-of-Fools series with Shares Investment.
It is my belief that it is far more important to understand the risks in an investment than to be blindsided by risks that I choose not to see.
A Fool’s take
I am often not the smartest investor in the room. But, that’s okay.
In my opinion, it’s not possible for one person to know every single element on what makes an investment tick or the dangers that can be present. We can all benefit from learning from one another’s “motley” point of view. By doing so, I would argue that we stand to broaden our perspectives.
With a decade of investing under my belt, I submit that the collective intelligence of a community of Fools (we have a thriving one in the U.S. and would be aiming to build one here in Singapore!) is far more valuable than one man’s view alone.
In other words – I may not be an investing expert, but we are.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Vicom and Super Group.