Are you falling into the narrow-minded investing trap?
If you continually find yourself poring over individual company accounts, trying to decipher the realistic book value, weighing up next year's earnings potential and the like, well done; but you may also be guilty of having too narrow a focus. I know I am.
The problem is that you understand UK companies. You understand the language they use, how they present their accounts, where to find them quickly and easily and where to go for some intelligent and insightful discussion.
Also, you can, of course, invest in UK-listed companies only -- whilst simultaneously investing all over the world via the companies' activities. Nevertheless, UK stocks still tend to move broadly in tandem, over the short term at least.
This presents opportunities from time to time as quality companies are dragged down with all the rest. As many of us pointed out a year ago -- there were bargains galore and it was clearly a time to buy if you had any spare cash left.
Fewer bargains
Now though, I'm not so sure. As always, there will be individual bargains to be found. This is true of more or less any market, and trying to predict overall market direction is pure folly; far better to concentrate on individual companies. The problem is that many of us do so to the exclusion of other areas and a broader investment strategy -- and it's simply true that there are fewer obvious bargains around; just look at the numbers.
If you aren't guilty of this narrow focus, then please either read no further or perhaps make a few suggestions for others at the foot of this article. If, however, you feel the need to broaden your horizons -- as I do -- then it's time to get up in the helicopter. This, in turn, will help direct your investments.
So as we start out on this new decade, what do you see as the massive macro adjustments the world will make? This is a matter for personal opinion, but here's some food for thought:
Interest rates
OK, everyone knows they're going to rise -- but by how much and how soon? If inflation becomes more of a problem than it already is, the Bank of England will have to raise rates sooner rather than later.
The pump-priming has stimulated economic growth around the world and already some of the healthier economies' central banks have raised rates. And if the UK doesn't need to follow suit -- this will be bad news as it will only be because the economy isn't recovering.
House prices
There are few discussion topics likely to arouse more heated debate in the UK than this one. But whatever your view, they remain out of step with earnings.
Long-term data could suggest a correction to somewhere around four times average earnings. Do you see this happening and if so, what are the implications?
Demography
Our population is ageing, but working longer. What implications will this have in leisure and healthcare industries for example?
Currencies
What do you see as the long term future for sterling vs. other major currencies? And does your current exposure reflect your beliefs?
Commodities
will commodities continue their general upward trend as demand continues to be high from the large rapidly growing economies of China, India and others?
Energy
How do you see demand developing for oil and gas? What will be the world's preferred power options in the future? What's the likely future for nuclear or renewable energy sources, for example?
Banks
Do you see the banks still at a low point in the cycle; one from which they're likely to steadily recover as they get over their woes of too much shaky lending? Or do you fear there's worse to come?
These are just a few factors that spring to mind as worth taking into account when taking a helicopter view of things. There are many more, of course, and it's important not to get too bogged down in thinking about them as they often pull your decisions in different directions.
I'm all for listening to the news without the noise and you can be fairly sure that whatever happens will be surprising. But it's equally important to have a clear overall investing strategy; to know where your money is and why and how it fits with your overall plans and expectations.
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