Have an Advantage over your Competition
When you invest, you are “playing a game” in which “you are competing against other people”. Unless you
have some special knowledge on the subject, you should be careful investing in any given area. For
example, investing in fertilizers may be more complex than it seems. When the use of ethanol drove the
price of corn to high prices, farmers didn’t care what fertilizer costs because they had so much profit
margin. Do you know how the demand for fertilizer is going to respond to current lower prices for corn and
other grains? Since you are not a farmer, don’t you have a disadvantage when “playing the game” against
people who are actual farmers? You are also competing against traders in commodities who know the
market first hand. There are individuals who know which fertilizers are used in which proportions on
various crops. If grasses use more nitrogen fertilizer and the price of hay goes up, those players who track
fertilizer in detail will change their positions in the stocks of the fertilizer companies in a manner to
compensate for these price changes. Statistically these traders have an advantage over traders who don’t
follow this data. Always ask the Peter Lynch question “What is my advantage in this investment”?
Next
When you invest, you are “playing a game” in which “you are competing against other people”. Unless you
have some special knowledge on the subject, you should be careful investing in any given area. For
example, investing in fertilizers may be more complex than it seems. When the use of ethanol drove the
price of corn to high prices, farmers didn’t care what fertilizer costs because they had so much profit
margin. Do you know how the demand for fertilizer is going to respond to current lower prices for corn and
other grains? Since you are not a farmer, don’t you have a disadvantage when “playing the game” against
people who are actual farmers? You are also competing against traders in commodities who know the
market first hand. There are individuals who know which fertilizers are used in which proportions on
various crops. If grasses use more nitrogen fertilizer and the price of hay goes up, those players who track
fertilizer in detail will change their positions in the stocks of the fertilizer companies in a manner to
compensate for these price changes. Statistically these traders have an advantage over traders who don’t
follow this data. Always ask the Peter Lynch question “What is my advantage in this investment”?
Next
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