Overcoming the ‘investment imposter beast’

Enter, “Investing Imposter Syndrome”, which feeds off the inference that the investing and finance world has historically been less than accommodating to those outside of the “boys’ club”.

Then, add in jargon, acronyms and not knowing where or how to start – it’s understandable why so many people, particularly some women, can feel like an imposter on their investing journey.

Well, fear not. Overcoming the imposter beast is easier than you think. Even if you invest regularly, and have been doing so for years, it doesn’t hurt to revisit the basics and apply them to your existing portfolio.

The crux of overcoming Investing Imposter Syndrome is learning the basics. From there, women have a proven record of being “better investors”, according to various studies, because they let the power of time and compounding generate returns.

Another common deterrent for first-timers is set-up costs, even though you can start with as little as $500 to invest, then add to your portfolio bit by bit to build it over time. There is no need to commit your life savings to set off on a prosperous investing journey.

Preparing to start

Before you start investing, consider your goals and the level of risk you’re comfortable with.

With stock picking, common sense prevails. Back yourself and ask these three questions, which form the basis of your fundamental research, before you buy:

1. Is this industry growing?

Think about the brands and companies you deal with daily, consider your habits and investigate recent news and trends. As a starting point, this will likely direct you towards expanding industries and sectors.

For instance, the pandemic saw an increase in e-commerce and work-from-home-related sales. Like the rest of us, you probably increased the number of products and services you bought online and used more technology. It’s no surprise that many businesses in these sectors boomed and investors were rewarded with significant share-price growth throughout 2020.

2. Is the company growing its market share?

Examine if the company is seeking to widen its presence across its relevant market, as this can translate into increased future profits. Annual reports, company updates and media are good ways to assess a company’s intentions and outlook.

Research from brokers can also help provide additional commentary and identify if a company is a BUY, HOLD or SELL from their perspective.

3. Is the company’s revenue growing?

Simply, is the company going to make more money? To figure this out, check the company’s balance sheet and assess the earnings, cashflow and revenue. Has it been increasing over time? Dig into the announcements archives on the ASX website or the company’s website and assess its long-term performance – what has the company’s growth been over three and five years?

Taking your research to the next level

To do this, pair your research with some technical (charting) analysis –a feature that brokers, like Bell Direct, will offer to provide the support needed to back yourself and make quality decisions. Based on data, these tools can chart patterns and indicators.

Time and again, it’s been shown that combining fundamental research and technical analysis gives investors a higher probability of picking an outperforming stock. That’s one sure way to help banish Investing Imposter Syndrome.

Now you have the basics, think about longer-term themes and sectors to help you approach investing in 2021 and beyond:

Time to reassess

As an investor, the company earnings reporting season is the perfect opportunity to reassess your portfolio and identify your next move. Using the above guidelines, a company’s results give you the opportunity to get “under the hood” of the organisation and gauge its health.

If you own a company that has been downgraded, review the initial reasons you invested, consider the long-term outlook and assess whether the company’s earnings will still be growing. If these are no longer valid, it may be time to sell the stock.

For opportunistic investors, if you are looking at downgraded companies it’s likely their share price has fallen, so this could be an ideal time to buy-in.

Again, do your research. Don’t make snap decisions. Remember, over the long term, companies with growing earnings, cashflow or revenue and good management should shine brightly.

Key trends from reporting season

(Editor’s note: Do not read the following ideas as stock recommendations. Do further research of your own or talk to a licensed financial adviser before acting on themes in this article).

In the latest reporting season, mining companies punched above their weight, benefiting from Chinese demand for commodities.

Fortescue Metals Group (ASX:FMG) is one to watch, in Bell Direct’s view, with the company trading at all-time highs. Fortescue is also punching above its weight in female representation in mining (20% of its workforce) and is investing heavily in the renewables space.

Aside from the mining sector, the underdogs of 2020 strutted their stuff during the reporting season with insurance, communications (telcos) and financials reporting the biggest growth in earnings per share (EPS).

Within insurance, think nib (ASX:NHF) and Genworth Mortgage Insurance (ASX:GMA).

For communications services, consider REA Group (ASX:REA) and carsales.com (ASX:CAR). And finally, for the financial sector, check out Suncorp (ASX:SUN) and Commonwealth Bank (ASX:CBA).

On the flip side, the tech and gaming sectors saw the biggest earnings-per-share declines.

Don’t fear sharemarket volatility

2020 was undoubtedly one of the most volatile years in recent history. However, the aftermath has proven that markets do bounce back over time.

At the time, I wrote a piece for the ASX Investor Update newsletter about navigating uncharted waters, which includes some guidelines on how to navigate volatility.

Uncertainty within markets, and the world more broadly, is undoubtedly going to stick around for some time. However, don’t despair – volatility within the sharemarket is completely normal. It should be your friend when it comes to investing, and can offer an opportunity to buy in at a lower price.

If you hold a stock that loses value, don’t panic and sell out – as this locks in your losses. If it’s a quality company, its earnings and market value should grow over time.

Conclusion

If there’s one take-away from this article, it’s that there is no time like now to start investing. Time and compounding returns are your best friends. The sooner you beat the Investing Imposter Beast, the better.

As we approach it, International Women’s Day 2021 is the perfect time to shake off those investing inhibitions and back yourself to achieve financial freedom.

So, whether it’s your first time investing or simply brushing up on your basics to expand your existing portfolio, happy investing and happy International Women’s Day!