Contrary to the popular belief, you don’t have to be a financial genius, own a Master in Business Administration or be an insider to build yourself a profitable stock portfolio or simply make a great investment. After all, the basics are pretty simple: you buy low and sell high! It’s truly that simple.
In fact, listening to stock exchange conversations between pseudo experts, I often come to the conclusion that being a little un-educated about this entire finance stock market world can actually give one an edge.
First, I don’t have to unlearn all that unrealistic academic bull-shit that people in finance have been brainwashed by back in school.
Second, my judgement is not influenced by Wall Street’s way of thinking, because I do not always follow financial and stock market news.
Those, in return, allow me to have a way more simple, unique and practical understanding of what I should invest in. The way I see it, the only way your stock portfolio can beat the market is if you don’t think like everybody else. You must go back to the basics and see it for what it really is: investing in a profitable business.
First, you must stop listening to professionals!
If you start to invest like a professional fund manager, you will begin having the same results as them, which is not only boring but also mediocre. You have to understand that those professionals that work for banks are cubicle drones who are only good for following the directive of a heavy management structure. None of them wants to take the risk of losing their job. They make their money as employees and not as investors. They have shit loads of regulations of all sorts in their stock selection process and the management must approve of them all!
Everybody who worked for more than 5 years in a bureaucratic, managerial and heavily regulated environment knows what I’m talking about here. On the long run, the workers become fucking zombies!
This creates a situation where all the good, exiting and new promising stocks will not be on their watch list.
- It’s too new …
- It’s too small …
- It’s too low …
- Not enough volume …
- We don’t invest that industry …
- Never heard of them, must be too risky …
To get great returns, you have to buy and sell at exactly the right time. This means, to buy even before everybody at Wall Street starts talking about it!
When they talk about it in the financial news, it’s too late!
Yeah, it might still make 15% this year, but it will never make 300%!
Invest in business you believe in!
The stocks you must look for are all around you! In the streets of your neighbourhood, at your local shopping center, or on the web.
I’m talking about those new products or services that you start to consume because you love them. They are innovative or just really cool. Products and services that you can experience yourself! That’s what your friends like too; those things that more and more people around you are now using, too. These are the products that suddenly start being more and more in demand because they are trendy, hip, chic, cool, and whatnot, and because they are just there right under your nose.
A couple year ago, those super cool yoga pants for women started to become more and more trendy. There was that local brand, Loulou lemon athletica. Make no mistake, every man from where I come from knows what I’m talking about! They make women who wear them have the most perfect ass ever. It’s just impossible for a men, healthy or even dead, to not stare at a woman’s ass if she wears a pair of Loulou lemon . Any kind of fat or ugly ass would automatically take an attractive shape with those.
Of course, women quickly understood the great power they could have over men just by wearing a Loulou lemon. Even if a Loulou lemon pair pants cost at least 100$, I noticed that more and more women started to wear them. 100$ for them would mean an upgrade in power and social status that would allow them to extract resources from men in the most efficient manner. Basically, it’s a fucking bargain!
I went to the store to take a look at and buy a pair for my girlfriend who didn’t have her pair yet, and I was shocked! The place was crazy crowded, and the price of everything was just ridiculously high!
I thought that at this rate every woman in the country between 8 and 50 years old will have a pair or two of those pants soon enough!
This is good business, I’m in!
Forget about the pants, I want some stocks of this company!
Well, ever since that time my stocks have gone up from 20$ to 80$.
The same thing applies to NetFlix! I had never previously heard of NetFlix in my life when a friend started to tell me how cool it was and how he was about to drop cable-TV and just use NetFlix only. Only one month later, half of my friends started doing the same and everybody I knew had at least heard about Netflix. It became very clear to me that services like NetFlix will soon mean the beginning of the end for regular cable TV. I got a few stocks at 80$, now about 5 years later, they worth about 480$!
Again, the same with Under Armour; anyone who stops at a shopping center and follows a few athletes on TV could not possibly miss the sudden apparition and expansion of Under Armour. In just a few years, they went from a weird and unknown athletic underwear company to pushing Nike and Reebok on the side in every shopping center. I realize how crazy it was when I came to buy one of their cool shirt 2 years ago, and I almost puked when I saw they were selling them for 80$ apiece.
This is crazy, I’m in!
I got a few stocks at 16$, now they worth over 80$, and it’s not over yet!
I remember I was discussing with some finance professionals about the new coming of Facebook on the stock market. The only song they were all singing was that 40$ is too much, and it is never going to work. How will they actually make their money? They don’t have a great cash flow; it’s not a safe investment….
Are you fucking kidding me? It’s obvious to everybody that Facebook is a revolution! Everyone on the fucking planet is now on Facebook, and everybody loves it!
The only thing that sucks with Facebook is that I’m not the one who invented it!
Sure enough, I double my money!
If you can experience it and its good, and if you can see that it is getting trendier by the day, then it is time to put it on your watch list! Every time you think something seems to be really good business, it usually is. Put it on your watch list!
Sell when people get tired of it!
Every good thing has an end; people eventually get bored by anything and trends end up fading away or just get crushed by something better. When you see that the trend is ending for your favorite winning store, product or service, that friends and people around you are more and more on something new, keep your eyes open, try to understand why, and realize the fact that it is probably time to sell!
Usually, after an initial 5 years of expansion, a new company will start to stabilize or then decline. Again, look around you and observe the change in the market and the effect that it has on your favorite business. When it gets boring, sell it!
This way of investing in the stock market is good for the average guy who doesn’t know much about finance because it keeps you in a market that you understand with a business and industry that you can experience by yourself in your daily life. Also, it prevents you from sliding from a “investing in business” paradigm to a “gambling on stock exchange symbol” one where things can easily go bad quite fast.
If you are beginner at stock market investing, I can’t recommend you enough to first invest a little bit of your time into reading this excellent book on the subject, Learn to Earn: A Beginner’s Guide to the Basics of Investing and Business by Peter Lynch, before investing your hard won money! Starting with this book will give you strong basics that will prevent some catastrophe! Also available in Audio!
If you are already playing the game and want to bring it to the next level, I then strongly recommend you The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market. In this book, the author will explain how to do it like a pro! Everything you need to know to go from gambling on stock to investing in a company! From taking risk blindly to analyzing, calculating and understanding what is really going on!
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