Investing Series: Is investing partly a crapshoot?
This is a part of the Investing Series.
It kind of is.
If you take into account the following:
- Calculations can vary from one firm and person to another based on what numbers they use
- Media plays a big role in investors buying more or less due to fear mongering or greed
- So-called professional analysts at investment firms post reports on a company but really have no clue whether they’re right or not
…it can all seem like a big scam.
The market is based on what investors feel. Investors are human. Humans are irrational.
Following that line of logic, we have to basically bet in a market of irrational people who can’t see the forest for the trees, and listen to “professional” people who don’t know either.
Look at Apple for instance. It was down in the dumps, and then came roaring back with the iPod.
Plenty of people wrote about the death of Apple and couldn’t figure out how the company could last THIS LONG, screaming that they should just throw in the towel.
Or look at Starbucks.
I’ve been reading Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time (a fab book by the way), and many analysts predicted the death of Starbucks in the 1980s.
No one thought anyone would pay more than $0.50 for a cup of coffee!
They also thought Starbucks couldn’t make it, and predicted they would drop to $8 a share, etc etc.
Today? They’re at $62.00 a share or so.
Goes to show, doesn’t it?
This is why you need to do your own research, listen to your gut, and invest in index funds (or the general stock market) if individual stocks are too bumpy for your stomach.