Running into space…
We receive a multitude of commentaries, research papers and market updates daily - offering a tapestry of perspectives. Recently I read a piece from The Motley Fool, and it had a particular reference that struck me as an excellent analogy - one less experienced investors might find helpful, when contemplating the how and why of investing methodology.
The author of the article spoke about a quote from Ice Hockey legend, Wayne Gretzky - his message works for all sports and more interestingly, for share markets.
Gretzky said of his success, “I skate to where the puck is going to be, not where it has been.” And wow - doesn’t that sum up so much about how we look at investing?
Translated for investors, shares are priced on where a company’s future lies, not so much on where their past has been - running to where the action was last played won’t likely deliver a winning position, because the game has moved on. Anticipating the next phase and moving into that space (before the ball arrives) delivers better odds. But it may not always work.
When we watch a sports match, we tend to follow the ball, not so much what’s happening off it. That often goes unnoticed (players running into spaces that never get seen). Eventually though, the pass will come but even then, things will from time to time break down, as some unforeseen event interferes with the ball or players trajectory. But they keep pressing, running into the spaces, that will eventually give the strategy a tactical advantage.
As investors, we play a game to balance risk, one that requires we move into positions that may not be immediately obvious and sometimes, the bounce of the ball may go our way early.
Our game has interruptions and ups and downs, and from time to time - it feels exhausting. A champion team does not necessarily require a team of champions, but it requires a plan and everyone to do their part - the attackers and the defenders.
Where is the next puck/ball to be played? What will the share market be doing in five years...
The International Monetary Fund (IMF) is forecasting that China will account for 22.6% of world economic growth in the five years to 2028. In its latest World Economic Outlook, they forecast China’s economic growth contribution will be nearly double that of India and the US. India is forecast to deliver 12.9% to global growth, while the US is forecast to deliver 11.3%. Overall, global economic growth is likely to be sluggish over the next decade, expanding by just 3%pa. In the next five years (to 2028), it’s expected to be the slowest it’s been in the past 30 years. But remember, everything is relative and not all sectors respond or deliver at the same time, or in the same volume. So, we play an expansive game…
Be it ice hockey, football or building an investment portfolio of good businesses, we won’t be relying on one player, or on just one set move. It takes a team, with skilled players all over the field - some running to the space, others holding back ready to defend. If I may paraphrase: “We should move to where the return is going to be, not where it has been”.
The views and opinions expressed in this article are intended to be of a general nature and do not constitute personalised advice for an individual client.