Investing: An Art, Not Just Science

Investing is often misunderstood as a purely mathematical pursuit.

While numbers, ratios, and data play a critical role, there is an undeniable element of art in understanding what lies beyond the spreadsheets.

Here are some reasons for why Investing is an Art:

Numbers Do Not Tell the Whole Story
Even if a company’s financials look solid, it does not always guarantee success.

For example, in 2008, some of the biggest companies had strong balance sheets, yet the financial crisis severely impacted their stocks. Market sentiment and external factors like consumer confidence played a crucial role.

Business Perception Matters
The stock price is not only a reflection of a company’s performance – it also mirrors how investors perceive its future.

A company might be innovating, but if the market does not see the long-term value, its stock could remain undervalued.

Example: 3M has been innovating at a rapid pace to deal with changing needs of the consumer. Despite this, it has been hit by commodities price fluctuations and consumer sentiment of keeping prices low.

Market Conditions and Timing
Investing is also about timing. A great business might suffer in a recession, while a less-than-perfect company could thrive in a booming market.

These shifts make it essential to grasp where the broader economy is heading.

Example: Warren Buffett bet on American Express when it was hit by a scandal and everybody distanced themselves from it

Consumer Behavior and Global Events
Sudden changes in consumer preferences or global headwinds (like wars or trade restrictions) can derail even the best-laid investment plans.

Similarly, global tailwinds, such as technological advancements, can boost sectors unexpectedly.

Example: Ride sharing and hailing (like Uber or Ola) would have looked as a laughable proposition in the early to mid 2000s considering that booming economy. With economic setback due to 2008 crisis, people looked at every opportunity to make an extra buck

Understanding these qualitative factors is crucial to making informed investment decisions, making investing an artful blend of data analysis and intuition.

Hope this is helpful

All the best

God Bless!