One of the most basic characteristics of successful investing is common sense. It sounds obvious but it isn’t always as obvious as it should be. I’m going to use a real-life example of something that happened in my life to illustrate this point.
In 1968 I was a First Lieutenant in the U.S. Army and I was stationed in Inchon, Korea. My official position title was Transportation Officer for the Port of Inchon. It was a direct responsibility of mine to oversee all cargo coming in and out of ships at the Port of Inchon.
After the North Korean’s captured the U.S. Ship Pueblo in 1968, the Department of Defense (DOD) made the decision to dramatically upgrade the defense capabilities in South Korea. Cargo ships loaded with trucks, jeeps and tanks began to arrive daily, along with other needed supplies. None of the vehicles on the ships were operational when they arrived. Teams of mechanics were dispatched from Ascom Depot (about 20 miles away) to get the vehicles ready to drive. They would then drive the vehicles 20 miles back to Ascom Depot. Brand new two-and-a-half-ton cargo trucks, commonly known as deuce and a half, were driven from the Port of Incheon back to Ascom Depot, empty. At the same time, empty deuce and a half trucks were driven from Ascom depot to the Port of Incheon. Those trucks were loaded with other cargo from the ships and then driven back to Ascom Depot. I watched this happen daily and it made no sense to me. However, I did not have the authorization to change the policy. So, I did the only thing I was authorized to do. I wrote a memo and sent it to the Department of Defense (DOD) in Washington, DC. In the memo, I suggested that a new policy be implemented. After the mechanics from Ascom Depot got the brand-new deuce and a half trucks from the cargo ships operational, they would be loaded with cargo from the same ship and then driven to Ascom Depot. This would eliminate the need for other trucks being sent from Ascom Depot to load cargo from the ships at the Port of Incheon. The policy was eventually changed and I was given certificate with a written congratulatory letter for saving the Department of Defense a substantial amount of money (I don’t recall the amount).
The point of this example is common sense. And yet, until I wrote that memo to the DOD, there were empty trucks being driven 20 miles from the Port of Incheon to Ascom Depot and there were other cargo trucks making an unnecessary 40-mile round trip between the 2 locations.
As an investor, you can use the same common sense rational for investing. I’ve heard stories about successful investors who just observed what their children and their friends were wearing or using that was different than the norm. They would then investigate what companies were producing or selling those products. They would then buy stock in those companies, sometimes with enormous success.
Try it yourself. When you witness a new product that is becoming popular, think about who or what will benefit from that product. It could be a range of anything from a new mechanical device to a change in diets or eating habits. What’s between your ears, known as common sense, could be your next source of financial success. Believe me, it works.