The Connection between Investing Well and F1 Racing
By Dale Gillham |
As I sat down at my desk to write this report, I could hear the sounds of the F1 cars racing around Albert Park in Melbourne. This is the first Grand Prix for a few years and there was a lot of excitement in the air, which got me thinking about the correlation between investing well and F1 racing.
Tips for investing well
We all like speed and the adrenaline rush that racing provides, and we also like the thrill of making money. So, I’m going to share my tips on investing well and the parallel to F1 racing.
Tip 1: Strategy is the key to investing well - Just like F1 racing, where drivers carefully strategize when to make a pit stop or to overtake a competitor, investors must also have a well-thought-out strategy. To succeed, they must know how they’ll make money from the market, which means they need to understand their goals, tolerance to risk and investment horizon.
Tip 2: Manage the Risk - F1 drivers constantly manage risk, whether it's navigating dangerous conditions or avoiding a collision. Similarly, Investors need to manage their risk and one way to do this is diversification. Another way is to get educated to be able to conduct thorough research on potential investments.
Tip 3: Patience is a virtue - This may seem unusual, but F1 drivers must be patient and wait for the right opportunity to overtake other drivers or to enact their tactical strategies. Similarly, investors need to exercise patience given that the stock market can be volatile and unpredictable. It's important to stay focused on your long-term goals and avoid making impulsive decisions.
Tip 4: Constant learning - We know that F1 teams are constantly analysing data and adjusting to improve their performance. Likewise, investors need to constantly learn and adapt to changes in the market. Smart investors stay up-to-date on market trends that can help them make more informed decisions.
Tip 5: Teamwork – Drivers in F1 racing rely heavily on their team to help them achieve success, while smart investors know they need the best education, guidance and advice to help them build-long term wealth. The goal of an F1 driver is to not only be the first one across the line, but to also finish the race safely. They also want to be the best they can, and I think we can all learn from this because being consistently profitable in the stock market is about surrounding yourself with the right people who are motivated for you to succeed.
What were the best and worst performing sectors last week?
The best performing sectors included Materials up 7.01 per cent followed by Utilities up 3.89 per cent and Information Technology up 2.75 per cent. The worst performing sectors included Healthcare up 1.08 per cent followed by Consumer Discretionary up 1.40 per cent and Consumer Staples up 1.45 per cent.
The best performing stocks in the ASX top 100 included Allkem up 16.81 per cent followed by Block up over 16.07 per cent and Fortescue Metals group up 10.68 per cent and. The worst performing stocks included Cube Holdings down 4.97 per cent followed by Harvey Norman Holdings down 3.50 per cent and Atlas Arteria down 3.23 per cent.
What's next for the Australian stock market?
What a difference a week can make given that two weeks ago the All Ordinaries Index looked weak and while I thought it was searching for its low, the signs were not really positive. Last week the Australian stock market rose every day to end the week up 3.30 per cent, and is looking strong.
To put this into context, since the low on 20 March, the market has closed higher on seven out of the last nine trading days and rising over 4 per cent. Why is this significant? Well the All Ordinaries Index has risen back up over one third in price in a quarter of the time it fell from its recent high on 6 February into the low on 20 March.
While I’m not getting too excited just yet, the way the market unfolded last week indicates that the psychology is not only more bullish than bearish, but the bulls were more bullish last week than the bears have been bearish over the past month or so. While we are still experiencing a bit of a wild ride in the market and I would love to say that it has bottomed in the recent decline, I simply can’t, as we need more confirmation than just one week up.
Previously I indicated that my preferred scenario was that the market would find support and start to rise and last week’s trading has strengthened that. That said, we need to remain cautious as a few days up could just be a sucker’s rally. Therefore, I urge investors to be patient and wait for conformation of a move and not to make emotional decisions, as you could just be catching a falling knife.
For now good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.