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Analysis is not a Panacea

There are multiple methods to investing and never one right or wrong way in which to go about it. Some investors will invest with a financial professional, while others venture out into the market armed with personal knowledge in an effort to improve their returns. Although my personal approach is simply one of common sense investing, there are other factors that are included to help me achieve specific goals & objectives focused on results.

One of my strongest beliefs is to do what you do best; whether that’s following a specific strategy or a combination of what works best. I have the benefit of education and experience, but I’m always looking to add additional tactics to my arsenal of established skills. Recently I gave advice to a friend that one method of going about choosing a strategy is to take the best qualities from each that apply to your situation and formulate your own from that. In nursing we use this teaching tool in clinical settings with students: they learn the fundamentals, but also adapt their own practice to the positive and negative habits they observe from other more experienced staff.

Investing is no different; each investor will adopt a specific strategy to investing that may or may not work well for others. Developing your own strategy may be as simple as picking the methods you feel suit your own strengths & limitations best and ignoring the ones you don’t fully understand or feel don’t meet your personal objectives.

Panacea:

It’s an old term I learnt from a mentor a few years ago in reference to investing. Panacea was the Greek goddess of cures and my understanding of the word is “Cure All.”

What my mentor was trying to explain is that looking at the quantitative numbers of a company alone is never the cure all for deciding on whether they’re a good or bad candidate for investment. There are multiple other factors one should consider when examining a stock from a value perspective and I’ve learnt this through experience. What you need to do when examining a company is look at the whole picture. There are factors an analyst or yourself may miss that may have a monumental impact on the performance of a company over the long-term, of which plays little consequence on the stock price today. If you can overcome this short-term short sightedness, then you’re likely to be rewarded greatly for taking the time to understand the full dynamic of that business.

Although looking at numbers, ratios & other factors may seem to be the norm and I feel are essential; taking the time to perform a simple & detailed Situational Analysis can yield rewarding results when constructed properly.

Strategic Management is a passion of mine in business, so keep a close eye on the blog in the near future – I’ll be posting on this topic in detail and fellow investors might find the information very useful & informative.

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