Investment Strategies to Last a Lifetime

I realise this article is not entirely related to Talent Acquisition but I thought it would be of interest to Talent professionals out there who might be keen to dip their toes into the world of investment in 2018, or seasoned investors who are looking for some extra tips, or Talent start-ups who are looking to attract investors. Either way, I’m sure we can all learn something from what I’m about to share. So, here we go.
Our family has a long and sometimes chequered history of investing. My grandfather Joe was a cavalier investor and he lost most of the family wealth in the Wall Street crash of 1929.  My father Tibor, because of that experience, was much more cautious and he had a conservative portfolio of shares based on newspaper research and advice from a trusted share broker. As for me, I’d like to think that I’m somewhere in between.
Tibor started teaching me about investing when I was 18. His goal was to impart me a life skill and teach me about prudent risk and reward. Every Sunday night, we would pour over the investments and trade section in the newspapers and I quickly became conversant with the share market. I started a small portfolio of my own in my early 20s, which now has significantly grown.
My strategies have changed over time and I now invest based on pre-defined guidelines and, predominantly, for growth. When I follow these guidelines over a medium term, say 12-24 months, I tend to accumulate wealth at a greater rate than the average market growth.
Outlined below are my guidelines. I offer these as a guide and strongly recommend that you develop your own guidelines that work for you based on your desired level of risk, your own interests, knowledge and most importantly, where you are comfortable.  If a potential investment outcome will worry you or make you lose sleep, then it is not a strategy that you should undertake.
Here are my eight investment guidelines:

  1. Identify key trends and understand their potential impact. My best example is the milk powder exports to Asia. When China lifted the one baby policy and there was a scandal regarding the quality of Chinese milk products, I knew that demand for New Zealand and Australian milk powder brands were set to soar – I was right.  Another successful investment I made was in lithium – I noticed the increasing global focus on clean energy and growth of electric cars will mean that demand for lithium batteries will rise. I bought in and my lithium shares doubled in value.  Look for the impact of a trend and then do more research.
  2. Find technologies or products that will disrupt the market. There are many examples and one of which is Fastbrick, a robot that lay bricks.  Before this technology, you would have labourers manually laying individual bricks for a house and now, this job is set to be automated. This has the potential to change how brick houses are constructed and disrupt the entire industry.
  3. Read lots of different media. I read the Financial Review, Kalkine, Morningstar, Fat Prophets and many others.  The aim is to spot opportunities and trends.
  4. Use a proven and trusted Broker. I can manage my portfolio if I choose to but I am not in the market 100 percent of the time nor do I have access to all IPOs that float.  As such, I partner with Rob Hughes from Phillip Capital, who is aligned to my needs, and he keeps me in check on our agreed path.  We speak at least three times a week to review the market, exchange ideas and set our tactics.
  5. Make investments in companies have a global outlook, wide applicability and an international sales capability. An example would be Enboarder. This company has invented a technology that is disrupting the onboarding of new employees and it has the flexibility to be implemented on a host of other applications. It has been sold in the US, Australia and is used by global brands such as GE.
  6. Verify your thoughts and determine if they have legs. This can be undertaken by using your network and doing internet research.  You should also ask potential buyers of the solutions for their opinion.  I visited lots of supermarkets looking for what infant formula was the most popular.
  7. Review the key people working in the company that you are looking to invest. Use LinkedIn to determine if they have the track record for creating success.  Ask yourself if you would hire these people if you were the owner of this company and why?  I also like companies with a good representation of females on the board and in executive positions. Diversity creates success.
  8. Critically review the financials. I look to see how much revenue there will be, what the investment burn rate is and, most importantly, how much they are paying their staff. It all needs to be in balance.

The above points are mostly applicable to publically listed companies. I have been asked many times for my strategy for investing in startups.  My response is quite easy and they must answer yes to the following questions:

  • Will the technology disrupt the market?
  • How wide is the moat for the technology?
  • Do I rate the key staff to deliver on the promise?
  • Does this startup have global applicability and reach?
  • Is the investment burn rate in keeping with the potential revenue?
  • Is the valuation of the start-up reasonable (15-25 multiplier) for the forecasted net revenue?
  • Will the startup be revenue positive in year two?
  • Lastly, do I like the key staff?

As for my “no-fly zones”, they include:

  • Do not invest in retail (being disrupted by online);
  • Avoid hospitability (margins are always very fine); and
  • Stay away from insurance (prone to natural disasters).

Dr Simon Moss who is a lecturer in Applied Psychology and Neuro Psychology has a theory that decisions based on research and analytics have better outcomes on average than decisions based on intuition or gut instinct.  I totally agree with this line of thought and while I listen to my intuition I back it up with some research to get repeatable optimal investment outcomes.
My biggest mistakes usually come from listening to and following other people’s advice rather than doing my own research and following my own guidelines. Most of the time the person offering advice invariably cares more their objectives rather than considering your needs.
Whilst some of the guidelines and advice I have shared may seem ordinary and obvious (I apologise for those who are looking for something extraordinary), I am reminded by the old saying by Edward E Munro – “The obscure we see eventually. The completely obvious, it seems, takes longer.”
I hope that I’ve added some value to your investment strategy. All the best!
Image: Shutterstock

Speaking about investments, how about investing in your personal development at the upcoming Australasian Talent Conference 2018 to learn more about how can you thrive in a post-A.I. recruitment world? Find out more here.

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