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Investments and the world around us

11 Jun 2018,

Around me, I have people who are making long term investments, but also people who are more experienced and they trade in the short term, or, for example, the hedge fund managers who invest in millions. Investing is simply my life. But how does the investment world look to a person who does not really invest or fully understand how investment works? How do I see the same world in comparison? That will be the topic of today’s article.

 

A typical day

We get up in the morning, we uncover the blanket, and get out of bed with right, sometimes left foot. The morning ritual begins with washing and breakfast. We make coffee or tea, someone will have a cigarette, and we prepare a breakfast – cereals, fruits, vegetables, bacon eggs, ham, cheeses, pastries, fresh juices, lemonade or just a croissant with black tea.

The morning shower splendidly kicks off the day, we cannot skip out cleaning of teeth, and we can go out to create values in our dream work. We use a city transport, car or other means of transport. At work, we go to the computer or we start our manual job. After work some fun, like sports, shopping, family, dinner or beer with friends. During the weekend deserved rest – on a weekend house, an extended weekend trip in Europe, a trip to nature or shopping in big hypermarkets. This is our circle that is different to all of us, but in some way, it is surprisingly similar.

We are consumers

One is common to us – we are consumers. Someone bigger, someone smaller. How many times do I find myself thinking about the company that produces the Colgate toothpaste, the Gillette blades or the Pfanner orange juice instead of having breakfast or just brushing my teeth.

Through the investor’s eyes

Let’s go together through one day and discover companies that can be part of our days (this will vary based on the country of your residence). We wake up and uncover the blanket. Beds and bedding can be made in Ikea. Next, we move to the kitchen, from Ikea or from Sykora, we open the Bosch fridge and takeout food from Lidl or Globus hypermarket. We cook our coffee – here we need electricity supplier, that is CEZ, for example. The morning cigarette can be from Philip Morris. In the bathroom we find products from Procter & Gamble – for example Oral B brush, Ariel washing powder, Old Spice deodorant, Gillette shaving machine or Head & Shoulders shampoo. There can also be also found Unilever cleaners.

We use the Volkswagen car or the Škoda trams and we go to work. At work, Dell or HP computer, Canon printer. After work, for example, tennis with Wilson tennis balls (Amer sports brand), shoes and clothing from Nike or Adidas. And after a beer with friends, Pilsner Urquell owned by Asahi, Japan. Weekend trip with low-cost Ryanair to Pisa or train carrier if you just want to visit your country. And that’s how we could go on forever – take, for example, Internet companies that I do not mention at all (Alphabet – Google, Facebook, etc.). At every corner, there is a company that provides us with a service or product.

Private and public companies

In principle, there are two types of companies – private and public. You cannot invest very well in the private ones, only if you would be friends with the owner and become a co-owner. How many times would the investor like to own shares of certain companies if they existed, such as Red Bull, Lidl or other family businesses. With public companies it is very easy – by buying stocks.

Shares are a share of the company, so we have a tiny share of each toothbrush, paste, shampoo or juice sold (in the form of paid dividends or share growth if the company is able to sell and generate profits). It’s up to us which companies we choose. Here’s is necessary to add one advice from Peter Lynch – invest in things you understand and where you know the company’s business model.

 

Ordinary person vs. portfolio fund manager

The advantage of an ordinary person to a fund manager in investing is that he can better choose a quality company. First, he does not have any limitations; secondly, he looks at the world around him, and he has information from the first hand – from the consumer´s one. With share purchase he transfer money to the company he selected. This money will be used for business development, for example, creating new jobs, improving the product, or creating a new one that will be beneficial to people and make life easier.

Please note: this is not an investment recommendation or an advertisement for any goods, only a personal opinion of the author. Invest with reason, not based on emotions.

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