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Know what you own and know why you own it. Invest in what you know. The person that turns over the most rocks wins the game. If you can't explain to a 10year-old why you own a stock, you shouldn't own it. Never invest in any idea you can't illustrate with a crayon. Behind every stock is a company. Find out what it's doing.
Big companies have small moves. Small companies have big moves. Long shots almost always miss the mark. Go for a business that any idiot can run because sooner or later any idiot probably is going to run it. Just because a stock goes down doesn't mean you're wrong. The stock market is filled with individuals who know the price of everything but the value of nothing.
In the stock market, the most important organ is the stomach. It's not the brain. Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves. A correction is a wonderful opportunity to buy your favorite companies at a bargain price. Everyone has the brain power to follow the stock market.
If you made it through fifth grade math, you can do it. Stocks aren't lottery tickets. There's a company behind every stock. You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready and you won't do well in the markets. Owning stocks is like having children.
Don't get involved unless you're prepared to love them for the long term. Investing without research is like playing stud poker and never looking at the cards. Look for companies that have niches, products, or services that are hard to replicate. I think you have to learn that there's a company behind every stock and that there's only one reason why stocks go up.
Know the story before you invest. You can't just buy it because someone says it's a good stock. If you can't find any companies that you think are attractive, put your money in the bank until you discover some. The best companies to invest in are those that can raise prices without losing customers.
Find something that's almost too boring to be public. Companies that have no debt can't go bankrupt. Buying stocks without checking the underlying business is like buying a house without checking the foundation. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them.
Time is on your side when you own shares of superior companies. People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. When stocks are attractive, you buy them. Sure, they may go lower, but nobody can pick tops and bottoms. You can't predict the stock market.
You can predict earnings and company growth. There's no shame in losing money on a stock. Everybody does it. You have to say to yourself, if I'm right, how much am I going to make? And if I'm wrong, how much am I going to lose? That's the riskreward ratio. You only need a few good stocks in your lifetime to make a lot of money.
A stock does not know you own it. You can lose money in an overpriced stock much faster than you can make money in an undervalued one. Average investors can become experts in their own field and can pick winning stocks as effectively as Wall Street professionals. If you're prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand.
There's no shame in taking a profit if a stock is up 100%, but selling an outstanding stock just because it doubles is like pulling the flowers and watering the weeds. The best time to buy stocks is when everyone else is selling. The biggest mistake investors make is believing that what happened in the recent past will continue to happen.
Hold stocks for the long term. Think decades, not days. It's not timing the market, but timing the market that counts. Owning stocks is like planting trees. You don't go out the next day and yank them up to see if the roots are growing. Time is your friend. Impulse is your enemy. Investing is the intersection of economics and psychology.
People are always talking about markets being overvalued or undervalued. That's fine, but it's more important to pick great companies. Great stocks are often those that no one else wants to own. The best investors are those who are most comfortable with uncertainty. Risk comes from not knowing what you're doing.
Don't try to be a hero. Stick to the basics and let your results speak for themselves. Don't forget to like, subscribe, and ring the notification bell. See you next time.
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