I sold my car a couple of months ago. I have been using uber every day to travel to work. Otherwise, my wife and I use her car to get around on the weekend. I am amazed at how many people tell me that this is a mistake and that it is cheaper to get around with your own car. What amazes me, further, is that these people haven’t crunched one number. Yes, not one number. They base their beliefs on preconceived ideas and not evidence.
Well, I crunched the numbers and in my personal circumstances, uber is cheaper to commute to work. Believe me or not (most won’t) but buying a car would cost me a lot more money. There are also some negatives of using uber. These are inconsistent driver quality, the need to take a bag with me everywhere (i.e. can’t just leave stuff in the boot) and, most importantly, I don’t want to have to carry a baby car seat around with me everywhere. So, I am taking delivery of a new car in a few weeks.
The point is that people just believe things based on no evidence. It is the same with investing. Active managers are the best at this. They will tell you things that sound great in theory but have very little evidence to support them.
- “We have large highly-skilled research teams that uncover opportunities the rest of the market can’t.”
- “We can rotate in and out of sectors at the right time.”
- “If you invested R100 on “x” date you would have had R[insert large sum of money]” (yes, pick one data point and ignore any investor behavior)
And so on…
This year I am going to try to use only evidence on Forget the Noise. I will, of course, have opinions but I will try back them up with hard numbers. I will also try not to use numbers that only confirm my thinking.
The first piece of hard data I use is dividend yield, growth and cover. My hypothesis is companies that have these favourable metrics make better investments and will tend to be in business for a long time. The reasearch on Dividend Aristocrats (albeit US-based) shows this to be the case. Of course, some divided companies will fail and other companies with poor dividend metrics will do well. Nothing is certain.
Forget the Noise is “not get rich quick”. We collect and grow dividends. Often this takes a while. Join us to do the same!