The Value Perspective

Every time you make a trade, think about whether you're taking two steps forward...

Nick Kirrage

30 Jul 2012

Any investors who are feeling a little bit guilty about the amount of time they will be watching the Olympics over the coming weeks can console themselves it may actually be one of the best decisions they make this summer.

Summer may finally be here – at least it was when this was written – but the sun does not appear to have brought a corresponding brightening of investors’ moods. Most still feel beset by the seemingly never-ending stream of negative news. As we have argued many times, compelling opportunities do exist but, as it is so difficult to paint an upbeat picture of the future, the market is just ticking along.

Indeed, the FTSE 100 index first pushed through the 5,500 mark – its current level – at the start of 1998 so we have been in and around this neighbourhood for a long, long time. In such an environment, professional and private investors alike can often feel as if they ought to be doing something – anything. Trade, buy, sell, add value – just don’t sit there being ground down by a sideways market.

Yet, in many ways, the best thing investors could do is switch off their computers and head off to watch the Olympics. Go home and turn on the television or, if you are lucky enough to have some tickets, go and enjoy the hockey, gymnastics, synchronised swimming or whatever – because, as we have also argued many times, sometimes the best thing investors can do is nothing.

Once you have carried out your company analysis and made all the trades you feel are compelling then, if no new opportunities present themselves to buy stocks at a low valuation or sell at an elevated one,  don’t try and invent some.

Every time you make a trade you need to be very confident you are taking two steps forward because the associated costs guarantee you will be taking one step back. So any investors feeling a little bit guilty about the amount of time they will be watching the Olympics over the coming weeks can console themselves it may actually be one of the best decisions they make this summer.

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