Investing and Sports Both Include Competition
October 28, 2021
Let’s compare investing with sports. In both cases you want to win.
It gets more complicated when you consider investing.
For every stock trade there is a buyer and seller. The buyer wants a low price, the seller a high price.
In stock trading terminology there is a bid and ask. Then the two parties voluntarily agree on a price to complete the trade.
Unlike a sport, you compete with investors from around the world when you buy or sell a stock. In sport you might have a competitive advantage.
In 2020 there was over $900 Billion of stock trades every day. Each buyer and seller bring their own information and opinions to every trade.
Investment capital around the world flows freely. In essence, everybody competes with everybody.
Over the long-term stocks have done very well.
In my opinion, you do not want to own just a few specific stocks. You have no idea of knowing in advance what stocks will do well and which will do poorly.
My preference is to invest in an extremely well diversified portfolio holding different companies in different industries in different countries. Your investment return will be based on hundreds or thousands of different businesses.
Competition is fine on the tennis court or hockey rink, but when it comes to investing, diversification is your friend.
Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments – www.watsoninvestments.com