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By Scott Ronalds
Special to the Financial Independence Hub
I love Google. Want to know how many grapes are in a bottle of wine? Google it. Need directions from Granville Island to Gastown? Google Map it. Want to watch James Corden’s latest carpool karaoke? YouTube it (Google’s parent company owns YouTube). A world of information is at your fingertips.
A friend of mine adores Nike. He can’t get enough of their shoes, loves their style and innovation, and thinks their marketing is brilliant. He may even have a swoosh tattooed on him somewhere.
Whether it’s Google, Nike, Starbucks, Apple or others, there are a lot of impressive companies out there doing remarkable things. And the really cool thing is that we can own a small piece of many of them. Think about this for a minute. Any individual can buy shares in a publicly-traded company and participate in its growth and success (or failure, as it may be). Investing is an amazing thing. So why do so many people ignore, fear, or just put off investing? (Reports suggest people are sitting on huge amounts of cash.) It’s a question I ask myself all the time.
Investing is simply about owning pieces of companies
I think I know some of the reasons. Investing is risky. But it’s also become confusing and scary: which makes it prime fodder for the media. Corporate and economic figures are dissected with minutiae. Stock prices are updated every millisecond. The lexicon can be baffling (the Steadyhand Dictionary can help you make sense of it). Complex algorithms and trading strategies have emerged. The use of derivatives and leverage have amplified the risks. Unethical practices have been exposed. The whole system has been called rigged.
Except it’s not. At its core, investing is simply about owning companies. It’s just that there’s a lot of noise to distract us from this basic premise. If we get caught up in the short-termism, the bold headlines, the daily predictions and the volatility, it’s easy to make bad decisions, chase the latest trend, trade too much, lose money, and fall into “the system is broken” camp. But this isn’t investing. It’s gambling.
Ownership, not Speculation
When you buy stock in a company, you’re not buying it for how the business might perform next quarter. You’re buying it for how it might perform over the next 5 years. The next 10 years. You’re not a speculator. You’re an owner. It requires patience. But when you can buy a collection of compelling businesses at reasonable prices*, tune out the noise, sit tight, and prosper over time, it’s a beautiful thing. It’s investing. More people need to fall in love with it again.
(*Admittedly, this is the most important and difficult part of investing. It’s subjective: what one person believes is a good price, someone else may view as expensive. This is where experience and approach comes in, and why it’s often wise to rely on a proven professional.)
Scott Ronalds is Director of Communications for Steadyhand Investment Funds. He is a Shareholder of the firm and also works with clients, providing advice on asset mix and portfolio construction. Scott has more than 20 years of experience in the investment industry. He started his career in the late 90’s at Phillips, Hager & North, and joined Steadyhand in 2006. Outside the office, he can hold his own on a pair of skis, but his golf game needs some serious editing. This blog originally appeared on the Steadyhand site on July 21, 2016 and is republished on the Hub with permission.
