SIMON BROWN: Swings in fads? Keep a straight bat
Fads and trends are everywhere. But remember NFTs? You don’t have to chase after every new thing — keep your focus on your investment philosophy
Picture: Kevin Ku/Unsplash
Picture: Kevin Ku/Unsplash
I was at the 1999 Boxing Day Test against England in Durban. England scored 366/9 and declared; South Africa managed just 156 in their first innings and England enforced the follow-on. In South Africa’s second innings, Gary Kirsten scored 275 runs, setting a new South African Test record. He batted for 14 hours, the second-longest individual innings in Test cricket, and I watched every one of the 642 balls he faced from the grassy banks. In the end he helped secure a draw. It was riveting and boring at the same time.
He spent most of the time blocking deliveries and only tried scoring off balls when he felt confident that he wouldn’t be out. It was a block fest of epic proportions as he played to his strengths.
Investing is the same. We get to decide which potential investments we go after and which we leave alone, and generally we’re better off leaving most to whizz past us rather than trying to catch every trend.
Of course, we often fear missing out on some hot new fad, and it’s true that a fad can turn out to be the real thing. But mostly, fads just fizzle out. Remember NFTs?
The way to manage your fomo is to have a clear understanding of your investment philosophy. What are the megatrends that you’re looking to catch and profit from? Then, which sectors and stocks will benefit from that trend?
When a new fad comes along, explore how this may fit into your philosophy. Equally important is to consider where you want to invest in this new trend.
Ignoring trends is perfectly fine. Crypto is an example where the roar from the supporters is loud, but you don’t need to get involved. And you don’t even need to explain yourself. You can have a look and decide whether or not it’s for you.
Other trends have enough momentum that they’ll find their way into your investing anyway without you having to do much.
Take AI. Yes, there are some hot AI stocks right now, the obvious ones being the chip designers, chip makers and chip equipment manufacturers. Added to this list are the large tech stocks, which are all doubling down and spending tens of billions to try to get ahead in the race.
In five or 10 years, AI will be everywhere you’re investing. It’s already being used in some less obvious cases, such as WeBuyCars, which uses AI for buying and selling vehicles; it says it is seeing tangible benefits.
This is much like the internet boom of the late 1990s. Everybody scrambled to be first to get a slice of the action, and now the internet is everywhere anyway.
So keep your focus. Know why you are investing and what areas of the market you want to be invested in. When new trends come along, have a look, but never feel compelled to invest unless it fits your strategy.
