Topic: How To Invest

What is Pat’s commentary for the week of June 16, 2015

Article Excerpt

Most successful investors agree that it’s a good idea to base investment decisions on facts rather than predictions. You can make mistakes with facts, of course, but predictions have a much higher failure rate. However, one little noticed obstacle to investment success is that it’s easy to mix the two up. Perhaps the best example of this is the tobacco industry. Starting a few decades ago, cigarette makers came under relentless attack from government, health authorities and lawsuits. Many investors took it for granted that the industry was doomed. Lots of smokers quit, and this hurt cigarette demand. But the obvious negatives stopped new competitors from entering the industry. Laws against cigarette advertising limited advertising expense for the industry, so profitability rose. Cigarette makers were able to pass the costs of litigation and regulation onto their customers. Meanwhile, tobacco use grew quickly in emerging markets. The anti-tobacco movement was a fact, and a good thing. It helped many people avoid lung cancer,…