One of my companies is using British brainpower to create within our British company trading algorithms. I stress the point British because one argument I have made to investors into Britain is that such intellectual property is more valuable than if held by other countries. We have after all in financial services the world’s largest algorithm based hedge fund in the UK and also research centres at Oxford University supported by that same hedge fund.
When I visited Belfast, arguing exactly this case to Indian investors about doing their Research and Development in the UK and creating such intellectual property from here – like Jaguar Landrover does. And it made a £1 billion profit in just one year from its British outfit. A good tidy simple goal to set myself too then with our trading algorithms in our British company!
Many people, if not most, find the markets confusing. Share prices often go down after good news and go up after bad company news. Some people often think the markets ‘are out to get them’. They complain that as soon as they buy a stock, its share price drops. Other complain that whatever they read in the papers does not translate into expected share price moves.
Little wonder private investors often seek alternative methods for evaluating their investment decisions. In particular I enjoy speaking about understanding the stock market using price charts. Many people don’t know that huge funds don’t ever use the media or a company’s accounts, or meet a company’s management, but instead simply look at a historic price chart of how a stock is moving in order to calculate whether it is worth investing. This is actually my favourite way of investing. Thanks to software and websites this is quite easy to do.
Many investors don’t see the benefit of this being to remove personal emotional investing. You see in reading a price chart and following rules of interpretation you should, the theory goes, be more objective. And being objective is critical to good investing. You should also be able to examine more companies than if you were reading all their annual reports and investment magazines.
One of the critical and most important parts of investing is keeping it efficient, and this is also where price charts come in. For instance did you know, even while a share price is rising you can anticipate it is going to turn direction by how slowly it rises? All these things help the investor make decisions more objectively and quickly and evaluate their existing positions more quickly without having to get second opinions or pray their stock is mentioned by someone on TV.
Being your own analyst is therefore vital and that is why I enjoy teaching the subject. I believe people should not only read what ‘experts’ say but learn how to do it themselves. That’s why in 2004 when I created some investing software based on how I select stocks I was not surprised when the company that created the software told me the stock picks from the software have produced an average 18.5% per annum return since 2004. That’s not bad given the stock market is up about 1% per annum on average since then.
And it too was invented in Britain. Not quite as well known as Jaguar Land Rover!
Alpesh Patel
www.alpeshpatel.com
