When I started investing, I would spend days researching on a single company, digging into historical quarterly reports, looking at segment reporting and analysing details of webcasts. I would scrutinise minute details of the company, even assessing segments of a business that contribute less than 1% of the revenue.
However, over time, as I gained more experience, I realised that I might have been paying too much attention to insignificant details. This was wasting my precious time without actually increasing my returns.
Don’t get me wrong. I am not saying that researching a stock should be a quick and easy process. What I mean is that we should focus our time and effort only on poignant details of the company. The big picture is also often more important than small insignificant details.
Just a few months ago, I attended a meeting with the management team of a retail real estate investment trusts (REIT). The team was presenting to a group of investors who wanted to learn more about the company.
When we reached the question and answer segment of the presentation, a young, eager investor stood up and asked a question. He asked the REIT manager about the growth in tenant base of the music industry in the REIT. It was an interesting question but perhaps added little insight for the other investors.
The music segment of the tenant base only contributed less than 1% of all the tenants in the REIT. Even a significant growth in its contribution would hardly make a dent in the overall profitability of the REIT.
I applaud the young investor for his eagerness and attention to detail. But to be honest, he had perhaps wasted his chance to ask a meaningful question to the managers.
Too often, enthusiastic investors, in a bid to cover all areas, end up paying too much attention to tiny details that add little insight. I was once like this. However, learning to assess the big picture helped me to use my time more efficiently and expand my ability to research on more companies.
As Warren Buffet once said, “There seems to be some perverse human characteristic that likes to make easy things difficult”. Many of us end up doing more work than we really need to. Focus your energy on asking the right questions, and you will find that investing would be so much simpler and more rewarding.
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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 Jeremy Chia doesn’t own shares in any companies mentioned.