There are a lot of negative connotations about investors. This article is not to change your perspective. I respect your opinion. With this article, I would like to differentiate a good investor and a bad investor.
Some people say investors love risk; I think that’s incorrect. There’s a difference between a good investor and a bad one. The good investor returns profits, the bad one loses more. Good investors hate risk, that’s why they do their best to eliminate it. Bad investors are called speculators; good investors are the shepherds.
When an investor does things with the sole reason of: “they feel it in the guts” or because “everyone says so” then in my opinion, that is a bad investor. A good investor has their own way to value companies (notice I didn’t say stocks). Stocks should represent the health of the company not the mindset of the public. Public sentiment changes quickly and if you value a company based on public sentiment, then you are a speculator, not an investor.
One product doesn’t change everything. You see, apple was very successful because of its marketing strategies. They were a great advertisement company when it came to the iPhone. That’s why they succeeded. All their other products are minor in sales. The iPhone wasn’t this new revolutionary device, because the first touch screen which incorporated a transparent surface came out in 1974 and was developed by Sam Hurst & Elographics. Granted, the iPhone used a “capacitive” touch screen which was actually invented in 1960s. Apple’s huge price mark-ups made it one of the most valuable companies in the world. What sparked their stock price to flourish was their cash reserves. As it is now very publicized, apple’s reserves are HUGE… bigger than I’ve ever seen however that’s because their leadership didn’t know, and still doesn’t know what to do with all the cash.
A good investor looks at the future benefits, not immediate benefits. If you plan on doubling your money within a year in the stock market, well, good luck. The reason why you need this “luck” is because you will be a speculator. You’re simply speculating the stock price will go up. If you know of a huger merger that’s about to occur… then you’re in trouble for insider trading or in other words, cheating.
In 1999, at a Berkshire Hathaway shareholders meeting, Mr. Warren Buffett stated the following, which might be a reason why people lean towards speculation: The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, “Swing, you bum!”
Do you think Barry Bonds would be one of the greatest hitters in the Hall of Fame if he always listened to his fans?
Let me know what you consider a good and bad investor? I’m very interested! – @arberdoci