Using Manufacturing Methods to Improve Stock Market Investing Results

Different business sectors can learn a lot from each other. In this case, methods common to the manufacturing sector can be helpful to stock market investing.

During the Covid lockdowns, I spent some time watching some shows that discussed stock market investing. The more I watched, the more it became clear to me that I could use my knowledge of manufacturing methods to help me understand and choose my stock market investments.

BOMs (Bill of Materials)

In manufacturing, a BOM is a list of materials and components that is required to produce other components or assemblies. Think of all the materials and components that go into producing a car or computer.

In stock market investing, there are investment funds called mutual funds and ETFs (Exchange Traded Funds). These funds hold many different assets like individual stocks in companies. These holdings make up the funds BOM.

In manufacturing, multiple BOMs can be analyzed to determine component and material commonalities and differences. The same analysis can be accomplished with mutual funds and ETFs.

Trends and Correlation Data

Trends and correlation data are used to see whether there is a relationship between two variables. In manufacturing, we may know that if product A’s sales are rising, product B’s sales will fall. We may use correlation data to identify and solve problems related to process and product quality. There are many uses of trends and correlation data.

In investing, we may also find trends and correlations. For example, if interest rates increase, the value of investments like stocks may decrease. If the value of utility companies is going up, perhaps the value of technology companies is going down.

Stock market investing can be risky. With proper research and understanding, risk can be mitigated. There are risks associated with every business decision. Hiring a new employee can be risky. Purchasing a new piece of equipment can be risky. Stock market investing is no different.

Related: Why Have a Small Business Retirement Plan?

For your investment needs, please seek the services of a reputable financial advisor.

Learning From Other Types of Businesses

Businesses can be improved by learning and implementing methods from other types of businesses. Stock market investing learning from manufacturing is just one example. Perhaps a healthcare business might learn something about customer service from a restaurant business. Maybe a non-profit organization could learn something about process controls and efficiencies from a for-profit business.

Consider using information from other types of businesses as inspiration to create new ideas that improve your business or organization. Give your business a dose of creativity and innovation.

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