A bit of logic goes a long way
As human beings we like to categorize certain areas of life as difficult. Take investing for example. Our minds are so insistent that investing is for those who are highly intelligent.
We think that it’s for an elite group of people who probably come from money or have studied it at university. I’m going to let you in on a little secret that could literally make you millions on the stock market.
It all comes down to supply and demand. Or whether people like a business or not. Sure, there are traders out there who make good money by looking at charts and running numbers. Hell I’m even one of them.
But a far less stressful way to invest in shares is to use common sense based on whether or not people like a business. Experts refer to it as buying the company AND its products.
Consider this. It’s Friday night and I certainly don’t feel cooking. I’ve done that all week I’m going to keep it simple and order a pizza. What are my options? Domino’s is always good. I don’t mind Pizza Hut.
Not a fan of Eagle boys and I don’t really feel like paying $20 to that gourmet pizza shop down the road. Actually now I think of it I remember that Domino’s ad how I can track my pizza order! How awesome is that? Some of the toughest moments in my life is between that moment I place an order for a pizza and it actually showing up! Now I know exactly when it will arrive.
Profit from pizza!
If this sounds like your Friday or Saturday ritual you have to ask yourself one question. How many other people are doing this right now? You see regardless of what is happening in the world you will be buying your pizza on a Friday or Saturday night.
Ebola? Sad but pizza! Chinese economy performing poorly? Meh pizza! Whilst the share market has done virtually nothing in the past 2 years, Domino’s pizza has being going in one direction, And that direction is up.
The chart below really emphasises this point. The blue line represents the top 200 companies in Australia. The red is Domino’s Pizza. You can see that the share price of Domino’s has more than tripled in 2 years.
If you purchased $10,000 worth of Dominos shares in 2014, they would now be worth more than $32,000! No university degree required to understand that people love pizza!
Chart from ASX.com via HUBB
Let’s continue our self-discovery session on how our logic can lead to riches. Your T.V is looking a little old. Sure it still does the trick but imagine watching films on a bigger smarter T.V.
What places instantly come to mind when you think of shopping for a T.V? JB HI FI? Bing Lee? Kogan? Or The Good Guys? (Yeah they still exist) Personally I will use any excuse to go to JB HI FI. It’s a place I can spend both hours and money with no problems.
Not only that but one of their major competitors in Dick Smith has closed down and they are looking at buying The Good Guys. They are really looking to dominate the market and the share price has responded.
This time last year JB HI FI was trading at $19 per share. Today they are approximately $23. Whilst not quite as impressive as Domino’s it is still a 21% increase in 12 months. Meanwhile the rest of the share market is down about 6%.
Another example includes Sukin. I noticed a lot of Sukin products appearing around my house. And sure enough my wife wasn’t the only one buying them. A quick look at their share price shows they have more than doubled in 12 months going from $2.26 to $4.55 per share.
What about Telstra? What comes to mind or what experiences have you had with Telstra? They have a reputation for poor customer service and the recent outages aren’t impressing customers either. What’s the first thing that a customer does when they cease their relationship with a business? They go elsewhere. TPG is the answer. Well TPG and iiNET.
That company with the quirky sweater wearing man was purchased by TPG. The result? The share price has gone from about $5.50 to $12.00 in 2 years.
It’s clear that you don’t need a finance degree to be an investor. You only need to have a look around your world and use a bit of common sense. Just look at the brand name of the device you are reading this on and let me know how their share price has performed over the past few years.
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