This post is not meant as financial advice and is not an endorsement of any individual stock or investing method. Do your own THOROUGH research and then invest with caution. AI and investing is a new area but will most likely grow in usefulness.
I’ve been doing the mutual fund thing for years and frankly, sometimes I find it boring and less than optimal. Therefore, I’m always interested in becoming a better “Individual stock” picker. Don’t get me wrong, Index investing is a wonderful place for people to get started and to educate themselves. I’ve always thought that the market is the best place to maximize your returns. However, I also believe the largest gains can be made by picking individual winners. In fact, last year, I beat the market handily in one of my retirement accounts.
A good way of enhancing your chance of picking a winner is to have a “buy and hold” mentality. That’s a big part of where my personal plan breaks down. Knowing your weaknesses in investing is a big part of the battle, and it’s something that I’ve improved upon since I started this blog. When a mutual fund chugs along with a good return of 8% to 15% each year, that is not that same as an investment that doubles or triples in less than 5 years. It’s impossible to only pick all winners, but when you do, your gains can more than make up for losses in other areas.
After doing a lot of soul searching over the past few years, I’ve fallen in love with one of Warren Buffets FIRST rules of investing. That is this: “A reasonable expectation of return of your original principal investment.” That makes things “real”, very quickly, and has me holstering my trigger finger MUCH more often these days. In fact, I’m probably as conservative now, as I was when I was a neophyte investor many years ago.
Don’t fall in love
Another flaw in my own personal investment strategy is I often “buy what I love”. I fall in love with a new technical gadget, and sometimes assume that it will automatically translate to financial success and higher returns. I’ll go out on a limb here and actually offer some direct advice. Don’t do that. There are simply too many risks, such as “copy cat products”, poor profit margins, etc. The list is endless. In the past, I’ve sometimes equated what people say about employment, i.e. “Do what you love…” with my investments or “Invest in what you love.”. The older I get, the more I think that both need to be evaluated on a case by case basis.
My most recent “bright and shiny thing” is Sonos. Sonos is a great, wireless speaker company that I fell in love with several years ago, with their clever advertising campaign that “painted” various rooms in colors, as music moved through the home. The quality of the sound that comes out of Sonos small and compact speakers is astounding. The system is also modular, so you can expand your system, one speaker at a time, in $200 increments. That I can handle. I’ve invested about $2,000 in their products over the course of the last 4 years. I never had a high end sound system previous to this.
I didn’t even know that Sonos was trading on the market! Then I noticed the stock ticker, floating in the background of a CNBC evening finance show. Hmmmm…can I make a killing, since I’m an early adopter and much smarter than the average Joe at timing these things? Don’t believe your own press.
I’ve been burned by this way of thinking in the past with 2 particular names and “popular” stocks. Namely Fitbit and GoPro. Both of these started out great but quickly turned into a bloodbath for me.
Leverage your tools
This weekends’ investment idea was timed with a need for me to upgrade the operating system on my iPad. A chore that I loathe but I muddled through. Along with that upgrade there was a need to upgrade the bulk of my installed apps.
One of those apps was Google. Google as an app is slightly different than just the search engine. (And I’ve rarely ever used it in the past) The Google app includes a small “feed” based on your preferences and previous searches. Low and behold when I opened the app (because I’m anal about getting rid of the small blue dot that accompanies updated apps that haven’t been launched yet) I noticed a great article in my feed about why investors might want to wait on an investment in Sonos. The piece was enlightening and convincing in its reasons for pause. The article only appeared in my feed because I had searched for Sonos as an investment, days before and on a different device.
For me, the practical application of artificial intelligence is when useful information is presented at the precise moment when it is needed. That’s exactly what happened here, albeit with a little serendipity. I may or may not have found this article on my own, through additional search, but it’s not a source I consult regularly. This feed provided me with timely and useful information that I’m convinced will ultimately save me thousands of dollars and potentially make me thousands more. When it comes to investing, I can always use another pair of eyes, and maybe a little supplement to my brain too.