Investing Lessons From 'Star Wars'
Knowing Disney, it's a safe bet that a ton of Star Wars toys and branded consumer products will also roll out in time for this juicy holiday shopping season. It will be a dark force on your pocketbook. In short, you're going to be seeing a lot more Star Wars in the future.
However, what if Star Wars wasn't just an iconic sci-fi fairy tale? What if the movies -- some great and all blockbusters -- offered up lessons that can be applied to the way you manage your money?
Humor me, if you will. Let's go over how some of most popular quotes from the first six movies can be useful in the art of investing.
'Your Eyes Can Deceive You. Don't Trust Them.'
One of the biggest investing traps -- no offense, Admiral Ackbar -- is confirmation bias. Investors tend to read positive articles on the stocks they own and gravitate to bullish discussions. It gives investors an inflated upbeat perspective, and that is dangerous.
Seek out the bearish arguments of every stock you own. Don't just dismiss the naysayers as they short the stock (just as you wouldn't dismiss the bullish opinion of someone who is long the stock). There are two sides to every story, and the more open-minded you are, the less likely you are to get blindsided when something goes wrong with your investing thesis.
'Judge Me by My Size, Do You?'
Yoda's sharp comeback also applies to investing. A lot of investors like to categorize their investments by their market values. Many identify themselves as large cap or small cap investors, as if there's some material difference beyond just the product of a company's stock price and the number of shares outstanding.
We know for a fact that many seemingly safe blue chip stocks have imploded despite their once-mammoth market caps. History shows us that there are plenty of steady and low-beta small caps. Judge a stock based on its growth potential and fundamentals. Don't limit your investing universe to all large caps or all small caps. Small stocks can play big and vice versa.
'You Can't Stop Change Any More Than You Can Stop the Suns From Setting.'
You can't assume that your investments will thrive in every climate. Fundamentals change, and companies are forced to adapt. We saw this play out at Apple (AAPL), which introduced the iPod when Mac sales were on the ropes. The iPod opened a new opportunity for the company, and the iPod's success -- as well as that of the subsequent iPhone and iPad -- actually helped breathe new life into Apple and its flagship computer business.
Things can also go the other way. Coach (COH) was once the undisputed top dog in premium handbags. Fashion can be fickle, though. Shoppers no longer crave the Coach logo, and the company has struggled to reinvent itself in today's marketplace.
You can't always "use the force," so to speak. Sometimes other actions force you into changing your course.
There's wisdom in Star Wars. You just need to know how to apply it to your investing.
Motley Fool contributor Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends and owns shares of Apple, Coach and Walt Disney. Try any of our Foolish newsletter services free for 30 days. Looking for a winner for your portfolio? Check out The Motley Fool's one great stock to buy for 2015 and beyond.