This past summer, I celebrated 11 years as a stock investor. I know I probably mention that a lot, but it is something that gives me tremendous pride.
The day I bought my first stock was the day I broke all the fears and all the barriers that were preventing me from participating in the stock market. To me, that’s a pretty big deal.
Investing, for me, goes above and beyond just making money. It has allowed me the opportunity to learn about businesses and what makes them successful.
Generating profits via investing is a beautiful thing. The icing on the cake is that I get to learn how my favorite companies thrive.
As my mentor Warren Buffett once said:
With that said, I’ve learned a whole lot along the way and thankfully continue to learn. I consider myself a lifetime student!
Below I share some of the investing strategies that I believe have contributed to my success.
If you have strategies that have worked for you, let me know in the comments.
With that said, here we go:
#1. I stay away from investments I do not understand.
I stay away from penny stocks, the FOREX market, Marijuana stocks, penny stocks, and pretty much anything that I don’t fully understand or that appears too risky (or a complete scam).
I work hard for my money, and I want my money to work hard for me while also allowing me to sleep well at night.
Peace of mind is important to me. If I invest in something that starts making me anxious, worried, or concerned about what will happen to my money, that’s not something I want to be involved in.
Regardless of how I personally feel about the investing methods mentioned, studies and research will show that most of these are fads and have a high level of scammers involved. Be careful.
#2. I stay away from IPOs.
An IPO is the name given to stocks of a company when it first becomes public. If it is a company I am interested in, I wait at least a year and observe from a distance.
Studies show that most companies that IPO crash about six months later. Also – most companies that go public are not profitable.
You might notice a lot of hype and excitement during the days leading to the IPO and maybe a few weeks after. However, the truth regarding the potential of the business typically comes out once things “settle down.”
I stick to companies that have been public for a while, have a solid track record of profitability and success, and have clear plans for continuous growth.
If a company is going to be good for the long term, there is absolutely no reason to buy it’s stock when it first debuts. To me, the risks of jumping in so soon beat the rewards.
#3. I like strong leaders and prefer businesses with very minimal (if any) competition.
Most of my portfolio is composed of strong leaders in various industries across the board. While all businesses have competition – I typically focus on those that I consider “creme of the crop.”
If a company is inside an industry where there’s a lot of competition and a lack of loyal consumers, I see that as a red flag.
In a nutshell – I stay away from any business where the customer’s primary concern is to find the cheapest option, and there is no brand loyalty, moat, or competitive advantage.
#4. Healthy Financials are Important to Me.
Before investing in anything, I like to take a very close look at financial statements. I look at a lot of ratios and valuation metrics (all of which I teach in the stocks class).
I also put a significant focus on things like sales, net income (profits), cash, and debt.
In other words, I open “the hood” of the business and take a very close look before making an investment.
To put this into perspective, think about it this way:
Buying stock in a company is like buying a piece of the business.
Let’s say someone you know asks you to borrow $2,000 and tells you they are working on a project and that your money will multiply over time if the project is successful.
You then ask to take a look at the “project” details and notice many red flags: Deep debt, no clear business strategy, very minimal or no sales, no definite plans on how they will turn a profit. Would you still lend that person the $2,000? Probably not.
The same goes for stocks!
Doing your research and buying stock in companies you love and have the potential to make you money over time, will make your investing journey a lot more enjoyable.
And that’s all folks!
What is YOUR approach when it comes to investing? Does any of this resonate with you? Let me know in the comments.
Cheers to Health & Profits!
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