The valuable lesson Dr Takao Inui has for every ASX investor

The ASX 200 has had a morning of ups and downs today. But rather than ride the peaks and troughs, take a page from Dr Takao Inui’s book.
The post The valuable lesson Dr Takao Inui has for every ASX investor appeared first on Motley Fool Australia. –

asx shares volatility represented by illustration of business man on boat at the top of a wave

The S&P/ASX 200 Index (ASX: XJO) has slipped lower in morning trade, down 0.05% at the time of writing.

This morning’s retrace came following a strong performance last week, which saw the ASX 200 finish the five days up 5.4%.

It also came despite most major European indexes gaining on Friday, alongside every United States index finishing well into the green. Technology shares again led the way, with the tech-heavy Nasdaq Composite (NASDAQ: .IXIC) gaining 1.4%.

Though still down 4% from its 2 September all-time highs, the Nasdaq is up 27% so far in 2020. That compares to a gain of 7% on the S&P 500 Index (SP: .INX) and an 8.8% loss from the ASX 200.

Tech shares still shining

Technology shares, as you likely know, were already outperforming heading into the pandemic. And since the lockdowns and social distancing began, they’ve really grabbed investor interest amid growing demand for tech gadgets and services from a nation now working, shopping and socialising from home.

That’s seen ASX tech shares enjoy similarly strong gains to US listed technology companies. Unfortunately, it’s difficult to give you a simple like-for-like comparison for the full year without crunching 50 plus company share price movements myself. That’s because the S&P/ASX All Technology Index (ASX: XTX) – which tracks 50 of Australia’s leading and emerging technology shares – didn’t launch until 24 February this year.

I can tell you that the All Tech Index is up nearly 29% since then. And that it’s up 1.5% in intraday trading today, while the broader index is flat.

Which leaves us with two takeaways.

First, the bull run in technology shares appears far from over. Meaning if you don’t already own some quality ASX tech shares, or want to add to your holdings, I believe that window is still open. If you want to own some of Australia’s biggest tech companies with a single investment, you can look into the BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC). The share price of the exchange-traded fund (ETF) is up 41% since its inception on 4 March.

The second takeaway is that all shares in every market are, at times, volatile. Share prices can swing from losses to gains and back again in a single day. Over the long haul, though, share prices of quality companies tend to only head in one direction. Higher.

Which, belatedly, brings us to Dr Takao Inui.

Why ASX investors need a ‘bulbous bow’

As far as I know, Takao Inui never invested in any Australian shares.

What he did do was develop the modern bulbous bow still used in many large ships today.

Building on research from other scientists, Inui’s work at the University of Tokyo in the 1950s and 1960s led to his discovery that ships with the right type of bulbous bow had less drag in the water along with greater stability. Meaning they can ride through the peaks and troughs in rough seas with far less discomfort for their passengers.

That’s incredibly useful for ships ploughing ahead through big swells. Rather than plunging up and down, the captain can keep a steady eye on the horizon.

And it’s this same horizon that long-term investors should keep in mind rather than bemoaning any short-term losses or even celebrating any short-term gains.

This ‘buy-to-hold’ investment philosophy is the same one employed by The Motley Fool’s own Scott Phillips and his lead analyst Andrew Legget in their investment service, Share Advisor. A philosophy that’s seen Scott outperform the benchmark with his ASX recommendations by more than 25% since 2011.

Here’s what Andrew wrote to members of Share Advisor last week:

Volatility is not risk, it is not something to be avoided or feared, it is just the price of admission into the lucrative world of investing on the share market. If you want impressive returns, you have to become comfortable with holding great companies during tough periods.

Avoid the desire to get in and out of investments because some ‘bad news’ arrives. In fact, if you continue to like the company and believe it has a strong long-term future, these are more often than not buying opportunities, rather than reasons to get out.

Over the short term, markets will fluctuate, sometimes for no reason at all. Your patience and nerves will be tested, sometimes for no reason at all. But if you stay the course over the long-term, the share price will match the performance of the business. Don’t believe us, just pull up the long-term chart of your favourite company and see for yourself.

That’s great advice from the team at Share Advisor. I especially like the last line. It’s real ‘bulbous bow’ thinking.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The valuable lesson Dr Takao Inui has for every ASX investor appeared first on Motley Fool Australia.


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