The Investment Strategy That Doesn’t Require Watching the News
Alex Smith
2 days ago
Finding the right investment strategy is a great way to start (or continue) your investment journey. Maybe you want to buy your stocks and tuck them away, only to revisit them at fixed intervals. The everyday noise and market volatility might be a ride you are not willing to take.
Early in my career in investment management, I quickly realized that day-trading was not for me. And that watching the latest news every day and reacting to it was not value-adding to my portfolio or to my life. Thatâs why I developed a strong focus on the long term.
The building blocks of the right investment strategy
Market noise refers to information that creates short-term stock price movements or emotion, but that lacks meaningful insight. This noise is everywhere, and it happens all the time. Therefore, it might seem impossible to ignore.
However, one of the best things investors can do is to learn how to do just that. The short-term market gyrations and latest news items of the day often have little bearing on stocks in the long run. So, how do we build an investment management strategy that allows us to do this?
Focus on secular trends
Secular trends are those trends that last for several years, even decades. These trends are a reflection of lasting shifts that are happening in society, the economy, or technology. Focusing on these trends means that you are taking a long-term and thoughtful approach in your investment management strategy.
There are many secular trends that are alive and well today. For example, the global trend toward natural gas as a preferred energy source is really taking hold. And it has a long growth runway thatâs supported by a few things. Firstly, natural gas is a relatively cheap energy source. Secondly, global exports of natural gas and natural gas by-products are in high demand. Finally, natural gas is comparatively âcleanerâ than many of its alternatives, such as coal.
Tourmaline Oil (TSX:TOU) is one of Canadaâs largest and lowest-cost natural gas producers thatâs benefitting from this secular trend. The ramping up of the recently opened LNG Canada facility is expected to boost natural gas demand significantly, likely boosting demand for Tourmalineâs natural gas as well as natural gas prices.
Invest in competitive advantage
A competitive advantage is something that transcends short-term market noise and fluctuations. An investment in Canada that holds a strong competitive advantage is Alimentation Couche-Tard (TSX:ATD).
This company is a leader in the convenience store sector. It has grown into a global behemoth, with over 17,200 sites and more than $72 billion in annual revenue. Running the numbers through an investment calculator, we find out that since 2006, the company has grown its pretax income at a 12.7% compound annual growth rate (CAGR).
We have seen consistent and strong growth from Couche-Tard, as the company has pursued its long-term growth plan.
Practice patience
Finally, letâs talk about patience. When you have your investment thesis that focuses on long-term trends and strong leaders, make sure you also have patience. It can be easy to get caught up in short-term noise, but stay the course.
Fortis (TSX:FTS) is an investment in Canada that has paid dividends to its shareholders. In fact, Fortis has a 52-year history of consecutive dividend increases — any investment calculator will tell you that’s wealth building. The story of Fortis is not one of quick gains; itâs one of shareholder returns that came slowly and steadily. A company like Fortis has an unbeatable place in the utility sector, providing its shareholders with stable, reliable and dependable performance. But investors had to stick around to get it.
The bottom line
Finally, to put these investment strategies into practice, investors have to have conviction and a disciplined process. Simply try to refuse to get caught up in speculation and emotion, and keep your eyes on the long term. Remember that there is always risk when investing. The trick is to diversify your investments in Canada. There are plenty of thriving industries and companies to choose from.
The post The Investment Strategy That Doesnât Require Watching the News appeared first on The Motley Fool Canada.
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More reading
- The Unexpected Benefit of Canada’s Lower Interest Rates
- If I Could Only Buy 2 Dividend Stocks in 2026, These Would Be My Picks
- TFSA: 2 Canadian Dividend Stocks to Buy and Hold Forever
- 1 Canadian Stock Down 3% That’s Pure Long-term Perfection
- Hereâs the Average Canadian TFSA at Age 50
Fool contributor Karen Thomas has a position in Tourmaline Oil. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Fortis and Tourmaline Oil. The Motley Fool has a disclosure policy.
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