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The Importance of Intuition In Stock Market Investing

There is an endless amount of due diligence to undertake before investing in a stock or company, and I am guilty of taking the occasional shortcut. Although in contrast to the likes of Warren Buffet, I merely watch the trailer, while he sits through the entire film.

There is plenty of free material available online to learn how to assess company accounts, perform discounted cash flows and generally learn how the sausage is made. These things, while provide a basis for any investment, are somewhat less inspiring to a hippie like me, so I will not be covering them.

Also, being a hippie of sorts, this does not preclude me in taking part of our man made systems. Capitalism has an inspiring side to it, even though it is heavily misused, and we can observe the individualistic or group exchange of energy through the sentiment of the market, providing an accurate representation of what is going on in the developed world, even if it is artificially inflated hype-stocks rocketing towards the edge of a cliff, or sleeping giants that have been side-lined for a naughty tweet they put out a decade ago. This is also a true reflection of parts of our society.

It takes a lot of self control to focus on a few quality companies, then wait for the price to fall below your estimated value of the company, then question what have I missed? before diving into the stock.

The important thing to remember is that you are buying a part of a company, hopefully a company that you use regularly, or at least have experience with. ‘Buy what you know’. This is where the intuitive part comes in…

The moment you walk through the door in a shop (online or not), you are immersed in a highly curated environment in which the designers have picked everything from the shapes and colours to the lighting and till positions to provide you with an experience. Sometimes these are manipulative and sometimes they are just creative. Pay attention. The staff have a script to follow, a quality of service to provide, and a minimum level of intelligence is required to work there, whether it is a fast food joint or a five star hotel. Notice what sort of people work there and how they enhance your experience, even if they are a poorly developed AI Bot.

Every swipe of the credit card leads me to thinking how much this product costs the company, what supply chain issues they may face, how socially responsible they are and how the product compares to competitors. For instance, many companies may virtue signal about locally sourced products, but this is often just a label of something that fits within the confines of a regulatory system or moral landscape of an already corrupt consumerist environment, rather than an actual sustainable system.

The feeling that we call intuition develops to something more conscious, yet we cannot apply rules to it, because each business is different. We learn to appreciate a quality product, what we prize in customer service, the thought that has gone into developing the customer experience, yet the metrics are often flawed, much like the GDP (Gross domestic product of a country) is a measure of prosperity, while behind the veil, the country is suffering an epidemic of depression and dissatisfaction. We can sense when a business puts the customer first, and while this is always a spectrum, it cultivates a feeling within us and our fellow consumers.

These things are learned over time through experience. The basic business attributes may be taught in textbooks, but our gut knows whether it is a true representation of good business or not.

In terms of morality when it comes to investing, we have our own compass. Tobacco companies may sell poison to humans, but companies which require heavy logistics and inefficient production processes poison the planet and concentrated populations of humans and wildlife, out of sight from the developed world. Perhaps you care more about the quality of product than the social impact and weight this less. You decide.

I personally have a love / hate relationship with big tech companies. While they are both value and growth stocks, I find that my investment in them is based on my cynicism of humanity. That we are a race of consumers seeking quicker and quicker highs and these companies know just how to satiate us. So I invest against my intuition until I find myself sitting in a room with a loved one, trying to connect with them while they are knee deep in a zombified social media bender. Ignoring the world around them and ignoring their own desires and thoughts.

All companies have good side and a bad side, this is entirely subjective. We have a feeling towards a company before investing as to whether we would be comfortable owning them. The due diligence will show us that the company may push the numbers around correctly, and their prospectus may show us all the accreditations required by an ethical company. But how we feel about owning the stock, owning it when it’s dropping and owning it when it’s rising is the difference between being true to yourself and enjoying the ride and just being there for financial gain at any cost, even if it is your sense of morality.

Enjoy your investments and enjoy viewing the landscape of the market as a reflection of your world. Be glad to be proven wrong in your cynicism and enjoy being right about your optimism.

Jungle Is Massive.

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