Investing involves a lot more than just buying stocks in different companies… it’s a way of discovering the world around you.
“Every day is a school day.”
– John Smyth’s (Rubicoin’s Head of Marketing) Mum
The above quote is one that I heard for the first time over the weekend and it struck me as a perfect way to sum up what being an investor is all about to me.
Yes, there are the financial incentives, but investing for me is far more exciting for another reason.
Before I got into the world of finance, I had worked in various other industries—from sales and marketing, hospitality, and even radio broadcasting. Each of these industries had their own perks and, I’m glad to say, I’ve never worked in a job that I hated (for too long). However, each of them also brought with them a certain inertia after a while.
There’s usually an air of eagerness when one starts a new job—meeting your new colleagues, learning the ropes, finding your place in an enterprise. But this often fades as the months and years roll on.
So far with investing, that day has yet to come.
The Strike Zone
If you’re a baseball fan, you’ll know who Ted Williams is. If you’re not, let me just tell you that he’s widely considered to be one of the greatest players of all time—unless you’re a Yankees fan. Throughout his career, Williams was utterly obsessed with how to hit a baseball. He even wrote an entire book on the subject.
In ‘The Science of Hitting’, Williams illustrates himself standing at the plate with the strike zone divided into 77 squares. Williams notes that if we managed to swing at pitches in the sweet zone, we’d be able to get a batting average of .400—an almost impossible achievement. However, if we were forced to swing at balls in the lower right quadrant, we’d only manage a 0.235, which is not a great score.
Warren Buffett, one of history’s greatest investors, was a big fan of this book and used it as an analogy for how he chooses to invest.
“In investing, I’m in a ‘no-called-strike business’ which is the best business you can be in. I can look at a thousand different companies and I don’t have to be right on every one of them, or even 50 of them. So I can pick the ball I want to hit. The trick in investing is just to sit there, watch pitch after pitch go by, and wait for the one right in your sweet spot. And if people are yelling ‘swing, you bum’—ignore them.”
This is an important message, particularly for novice investors. When you start investing, the urge is to find the best-performing companies and hope that they will continue to grow in value. But that can lead people to invest in companies or entire industries that they simply don’t understand.
What happens when that company hits a downturn? The investor panics and sells for a loss because they didn’t know what they were getting into.
While I agree with Buffett’s principle that you should only invest within your circle of competence, I’d take it one step further.
Investing can help you widen your circle of competence.
Widen Your Knowledge
Peter Lynch once said that, “Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”
I would add to that you also have to take an interest in it.
As consumers, we’ve already developed a circle of competence around certain sectors. We’ve bought consumer goods, shopped online, used social media sites. These are things that we know, which means that we can begin to think about them through an investing lens almost right away.
We don’t have to stop there, however. Investing gives us a way to look at the world differently and to start exploring areas that we’d never thought we’d be interested in.
Try this out yourself. The next time you buy a product—be it an expensive purchase or a beer at your local bar—take some time to find out who makes it. It’s likely that purchase has contributed to a number of revenue lines all around the world.
If we take the beer, for example, one simple purchase has affected the bar, the distribution company, the manufacturer, the bottler, the farmer who supplied the barley, etc. While your average person won’t know much about this supply line, investing provides us with a guide to where to start learning.
In the showroom of the Invest app alone, there are companies with such varied interests as machine vision, premium property markets, gaming in Macau, digital payments, and robotics. And if you’re subscribed to Invest Plus, we go even deeper down the rabbit hole.
My favorite word in the English language is ‘Sisyphean’, which comes from the Greek myth of Sisyphus. Sisyphus was a Greek king who constantly taunted the gods and managed to escape punishment time and time again. When he was finally captured, Zeus punished him by making him roll a boulder up to the top of a hill, only for that boulder to roll back down every time.
The term ‘Sisyphean’ is therefore used to describe some unrelenting and fruitless task that accomplishes nothing. Investing is never like that.
Regardless of if you actually invest in a company or not, the act of investigating it is a journey which reaps many benefits. Everyone has their own way of exploring the world, and for me, that’s investing.
Investing makes you more interested in the world around you, where every day is a school day with more to learn about than you could possibly imagine.