Most economic theory assumes that buyers and sellers know everything about every stock at all times. They then all make perfectly rational decisions based on that perfect information.
That sounds like a great way to run a stock exchange and all, but it's a far cry from reality. We need imperfect models to make sense of this living, breathing stock market of ours. And sometimes we need to settle for "good enough."
Perfection is awesome!
Yeah, I wish I had perfect information, too. Insurance claims manager Crawford (NYSE:CRD-B) saw its stock price more than triple over the last year while the S&P 500 focused on the "Poors" part of its name with a 40% decline. That would have been nice to know last year. Of course, if my info was perfect, I would have sold my Crawford stock back on Sept. 19 for a kingly 450% gain.
But reality is messy and unpredictable. Sure, the perfect stock is out there, waiting for you to invest your entire nest egg in it and multiply your wealth in a matter of months. There's just no reliable way to find that perfect stock for the future today. So we have to settle for mostly imperfection, unspectacular returns, and the occasional swing-and-miss disaster. The misses hurt, but they won't kill you, and you'll score lots of runs along the way if you just keep swinging.
Good enough is good enough
But you know what? That's all right. We invest to protect and grow our money -- not to make it onto some list of supergenius investors. That's what I do, at least. And while my investments in companies like digital cinema specialist Cinedigm (NASDAQ:CIDM) and Internet traffic balancer Akamai (NASDAQ:AKAM) have hurt me worse than the average S&P 500 stock would have, I'm keeping pace with Mr. Market thanks to a few excellent performers. Robotic surgery pioneer Intuitive Surgical (NASDAQ:ISRG) is my best investment and top holding, and superhero wrangler Marvel Entertainment (NYSE:MVL) isn't far behind.
My point is simple, dear Fool: You should be investing today. Sitting on your hands and waiting for the perfect pitch to appear in the middle of your strike zone won't score you any singles or doubles. And starting from today's historically low prices, it won't be terribly hard to find a few excellent companies with dedicated management and strong business models poised to bounce back from this misery to a new age of superior business results -- and stock returns.
One Foolish buy
For example, I saw hit video game designer Take-Two Interactive's (NASDAQ:TTWO) shares swoon after the company staved off an unwelcome buyout offer from Electronic Arts (NASDAQ:ERTS) this summer. I believe in Chairman Strauss Zelnick and the executive team he has assembled. And our Motley Fool Rule Breakers newsletter team has recommended the stock twice.
Am I 100% sure that this is the perfect stock? No. But my confidence level is good enough for me, so it's part of my portfolio now.
Take-Two has slumped along with the broader market since then, but time and excellent management will heal all wounds.
We all wish we had some magical insight into future returns and market manias, but this is real life. The best we can do is to identify a few promising investments and then strike while the iron is hot. Your mattress is no place for growing money. "Good enough" really is good enough.
Further Foolishness:
- This company is good enough for Fool analyst Toby Shute.
- This buying window is good enough for Warren Buffett.
- But is the market bad enough yet?
