Martial arts and investing have things in common more than you might think. Find out here! [Wednesdays: The Independent Investor]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
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We hope you’re having a wonderful day so far.
Let’s talk about a great coaching comment and investing tip for today’s article. Each Wednesday, we share our insights about various investing strategies and disciplines to help you grow your investment portfolio.
Excited to know more about today’s topic?
Continue reading below to know how this martial arts master’s life principle applies to investing too.
The Independent Investor
Clinical psychologist Shefali Tsabary once said:
“There is no universal template that can be applied to everybody. So everyone kind of enters the process in their own way, on their own time.”
What does Tsabary’s statement mean?
You can’t force something on someone or yourself if it’s not applicable to a particular situation or moment.
For example: If you’re having a fever, would you take a medicine that treats an asthma attack instead? Or would you randomly take a fever medicine even if you’re feeling well?
You wouldn’t, right?
It’s that simple. If you’re having a fever, you’ll take a medicine that treats fever… and if you’re not having a fever, there’s no need for you to take that medicine at all.
Let’s apply this principle to the concept of investing…
In one of his coaching comments to his workforce, Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, talked about his experience at the 2022 Stansberry Research Conference.
For him, the most important part of attending the conference was not listening to the speakers’ presentations (though they’re full of useful and interesting insights) but the “in between” moments.
He said in these moments, attendees got the chance to meet people and connect with one another in ways they couldn’t do online.
Here’s another highlight from his experience:
During the Q&A session, one attendee brought up Professor Litman’s lifelong interest in martial arts!
[Fun fact: Professor Litman has trained in a number of different martial arts over the years. These include karate, Brazilian jiu-jitsu, judo, and kickboxing.]
That time, the attendee asked him how martial arts have impacted his research methods and investing. Professor Litman said he wasn’t actually expecting such a question, but because of that, he realized investing and martial arts have some things in common than one might think.
Finding the RIGHT Tool for the Job
Photo from Hart of the Midlands
When Professor Litman considered the attendee’s question at the Stansberry conference, he immediately thought of Bruce Lee, a martial arts master who knew kung fu, taekwondo, karate, judo, American boxing, fencing, wrestling, etc.
During Lee’s time, many people would also ask him his opinion on the “best” martial art. It made sense to ask him that question. After all, his many years of martial arts experience should enable him to provide the right answer.
However, his response was unconventional:
“There is no fixed teaching. All I can provide is a particular medicine for a particular ailment.”
What did Lee mean by this statement?
There is no single best martial art. All are equally great. It’s just a matter of choosing the one that would help a person defeat a particular opponent in that particular situation and on that particular day.
Let’s look at this concept in the lens of investing.
According to Professor Litman, investors often come to him and ask about the best valuation measure, the best metric for growth, or the best investing style. However, he can’t answer that with a single measure or strategy because it all depends on what an investor needs at the moment.
One of the things he has observed is some investors swear by valuation metrics like the price-to-earnings ratio (P/E), which looks at a stock price relative to its earnings per share, or the price-to-book ratio (P/B), which compares a share price with total assets on a balance sheet.
Meanwhile, another group of investors try to find companies trading below their “intrinsic values”—the difference between the current price of an asset and the strike price of the option.
A few other investors are traders who never look at a company’s fundamentals and simply invest based on technical analysis.
See? No single investing metric or approach is better than the others. Like Lee, it’s just a matter of choosing the RIGHT investing strategy for a particular situation on a particular day.
Professor Litman says there are lots to consider in picking the right investing approach. These things range from where you are in the market cycle, what industry you’re examining, who’s leading a specific company, and where a business is in its corporate life cycle.
Additionally, Professor Litman says today’s market is a tricky one!
The tools that have worked effectively for years, such as investing in high-growth tech companies, just aren’t working anymore nowadays.
The reason for that?
Interest rates have gone up and debt is no longer dirt cheap. As a result, it is now harder for companies to grow.
That’s why if you want to enhance your portfolio in the long term, you have to watch out for new themes and strategies. As you do that, also consider the metrics or criteria that will fit your situation best.
Today’s stock market environment is not welcoming all investing styles as effective for any kind of investor. So, to do well in a time of pandemic rebound, be open to changing your approach depending on the situation.
… and last but definitely not least, be patient. As an investor, you won’t immediately see the gains you expect for a year or more. However, all your patience in investing will be worth it in the long run.
Keep this investing insight in mind!
Be a Bruce Lee in today’s world of know-it-all and do-it-all!
By choosing the right tool for the job, you’ll not only grow your investment portfolio but also experience more efficiency throughout the process.
Happy guided investing!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.
We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.
To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
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