Look for certainty when investing in stocks
“I look for businesses in which I think I can predict what they’re going to look like in ten to fifteen years’ time. Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people chew gum.”
People say that investing is risky. When they hear the word – invest, they usually think that it is another synonym for gambling. While there are two words that mean the same thing in English Language, investing and gambling definitely do not mean the same.
There is no certainty in gambling; only increase the odds in your flavor using Kelly Optimization Model and stay in the game long enough to reap its rewards, as in Blackjack and Poker.
While there is not much opportunity to tilt the odds in your favor on casino tables, there are many when it comes to starting own businesses and investing in various asset classes. In other words, the risk in investing is inversely proportional to the amount of research and other types of work performed to reduce uncertainty. If you know what you are doing, there will be discoveries of many high probability events for you to bet high. What happens when you only bet on high probability events and over a long time such as over a lifetime, is that there is a statistical certainty that you will reaped the positive expected return.
There is certainty in investing, properties in some areas certainly go up 10 years later, same for certain stocks also. How do you identify them in the first place?
The Internet may change a lot of things, but it sure do not change the way people have sex, do not change how people smoke, do not change how people drink beer and what brand they drink, do change a need to shave in the morning, do not change the need to wear underwear, do not change the need to have insurance, do not change how people chew gum.
Some products will almost be there 10 years later and so do the businesses producing and selling them. If the same companies will still be selling the same things in 15 years down the road, their earnings will also be there. The good news is, you don’t really need a crystal ball to see the demand that is satisfied by some businesses in 15 years time.
In addition, if the products did not change much, unlike General Motors or even Apple which need to consistently introduce new products, then the companies involved can save all the research and development costs, retooling costs etc.
Remember not only these products become their target markets’ needs already; their brands have also own a piece of their minds. Certainty of revenue is equal to certainty of their loyalty to those brands and needs. There is certainty in change, though someone said that the only constant is change.
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