Putting Your Crystal Ball Where Your Money Is

from the vested-interest dept

Stock investing usually boils down to 1) predicting the direction of a market or technology, 2) identifying the company you think is best positioned for it, and 3) buying that company’s stock. The iconoclast investors at Motley Fool, however, suggest that #1 and #3 should not always occur in that order. Borrowing a line from Kleiner Perkins legend John Doerr, Gardner asserts that the “The best way to accurately predict the future is to invest in it”. The theory goes that once you own a stock, you’re more (literally) invested in following that market or technology, and therefore more knowledgeable about where it’s heading. The same logic plays out with bubbles, which accelerate the process of investing heavily in a market and arriving at some winners. This strategy contradicts the idea of predicting first, and then investing. Of course, that probably isn’t what Doerr had in mind — KP has more of a stake in controlling the future than in predicting it. Oh, and at some point, you also have to identify some promising early movers, rather than just blindly investing and learning later. In other words, some pre-investment research isn’t so bad after all — just don’t tell the day traders.

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