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The investing lessons that come from distance

Out of the window, the shimmering Atlantic Ocean serves as a backdrop for the fronds of a palm tree, gently waving in the breeze. It’s half-term, the sun is shining, and I’m on Portugal’s Algarve for a week, helping friends prepare their apartment for another busy season’s rental through Airbnb.
Put another way, London and the world’s stock markets today seem very far away. Right now, my chief concerns are dinner – swordfish, again? – and precisely when it’s too early to enjoy a beer.

And while I’m not exactly cut off from the world, thanks to the Internet and some handy satellite TV channels, the hundreds of miles that separate the Algarve and the office back home serve as a salutary lesson as to how transitory a lot of financial and political newsflow actually is.
Put yet another way, I haven’t felt the need to take a look at my portfolio. And I doubt that I will, before I return home: my week in Portugal is serving as a welcome reminder of the discipline of distance.

Virtual irrelevance

As I’ve remarked before, the crash of 1987 was huge news at the time. Black Monday looked set to sear a generation of investors, with some global stock markets almost halving, although the fall in London was more modest, at just over 26%.
Today, of course, Black Monday just looks like a tiny blip on stock market charts. So too, of course, with the collapse that occurred just over a decade later, when the Russian financial crisis and subsequent rouble default brought the spectacularly ill-named Long Term Capital Management to its knees.
The dotcom collapse, the first Gulf War – from the perspective of sufficient distance, we see these for what they really were. And soon, the shock of 2008 will disappear into the market’s noise, even if it hasn’t quite done so yet.

Random noise

So too with a lot of other noise. Just as with stock markets, individual shares go up and down.
There are the daily – and almost random – fluctuations that we see in our portfolios, of course. But there are also trends, where share prices drift more-or-less in one direction or another for days, weeks, or months – up, if the market’s mood is positive, and down, if not.
Here at The Motley Fool, we’re long-term investors, and know to largely ignore the market’s moods. The view taken by a short-term trader or fund manager with his or her eye on the quarter-end is not normally a view that we would share.
We’re more concerned with fundamentals, with business models, and with a company’s long-term prospects. And as an income-focused investor, I tend to view events through the lens of their impact on dividend sustainability.
Put another way, should a share with decent income prospects fall out of favour with the market, thereby offering an attractive yield, I’m more likely to buy, rather than sell.

Home-country bias

Finally, distance brings another lesson: how small the UK and its businesses really are.

Even on the Algarve, with its strong British ex-pat community, familiar British brands are a rarity. Go to North America, and they are even less in evidence. Instead, you see other names, and other investing opportunities.
Ditto Asia, of course. A trip to Hong Kong, many years ago, saw me vastly increase my Asian exposure, almost overnight. In retrospect, 2008-2009, when Asian markets spectacularly tanked, was a buying opportunity on an enormous scale – and buy I did, as I explained here on The Fool at the time.

Diff’rent eyes, diff’rent strokes.

So there we have it. The sun is shining, and the beach is calling. And – who knows? – that first beer of the day may not be too far away.
Thanks to the Internet, smartphones, laptops, and satellite TV, it’s all too easy to take our home-country perpsective on holiday with us – thereby losing one of the great advantages of travel: the chance to see the world through different eyes.

For investors, that opportunity can prove very profitable. Don’t treat it lightly.

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