1. Buy good companies with strong financial statements. Companies with low debt, and companies that show a trend of growing and increased net income and revenue. Once you understand how to read a financial statement, you can make 70% of your decision to buy based on the financial statement, even before knowing what the company is.
2. Only buy companies that has a competitive advantage, one that would be had for another company to overtake them. A company where you can envision that 50 years from now, they will still be relevant.
3. Buy undervalued companies. There are many companies out there with great financial statements, a trend of growth, but the price must be right. For example, Amazon shows consistent growth, but at their current price and how much net income they are bringing in and P/E ratio, it will take many decades for them to make enough money to warrant that current price evaluation.
4. You only need a few very good companies to get rich. People that diversify don’t know what they are doing, so they try to mitigate risk. But to get wealthy, you go all in only a few stocks that you have thoroughly researched and meets all the criteria stated above. People that get very rich, they do it off only a few stocks. You want all your money in a good company where when it moves, it moves in a big way. Enough to move the needle.
5. Have a strategy, once you know the top 5 companies you are going to invest in, the price fluctuation doesn’t matter as much anymore. It will go up and down periodically, but each time it goes down, you need to buy more. Load up as much as you can when the price is low. You are betting on your research and confidence that 10 years from now this company will grow many folds. It’s hard to predict in the short term whether a stock going to go up or or down, but I can predict with high certainty that a stock will go up in 10 years.
6. Stock investing is simple. If a company is profitable and consistently brings in profit, the stock will grow and so will your money.
7. Ignore the micro / temporary issues in society. For example, covid, new politician, fear of war, Ukraine invasion etc. All this does not matter, it’s only temporary. A good company that historically shown to make profits and grow, they will overcome and continue to grow the long run.
8. Do not invest money if you need the money in the short run. For example you need the money in a week a month or even a year. Stock investing is long run, most big profits are made in year 6 or higher. You need to be able to buy and hold for 10 years to see substantial increases.
9. Do not invest in speculative stocks. Don’t invest in the story, for example “marijuana stocks” is the future, or electric cars or renewable energy is the future. Only invest in companies that you can check their financial statement and see they have a trend of growth. Not saying to invest in well established companies that are profitable, but you need to find a company that you look at the financial statements and pick up a trend of growth. NIO is an example of a good stock that has shown growth. Although they are still not in the green on net income yet, they show a trend of increasing revenue each year, closing the gap on the net income to be profitable and each year they are producing more cars and expanding their markets.
10. Remove the prejudice in your investing strategy. Don’t be prejudice because you don’t like investing in oil, or because it’s from China you don’t like Chinese people, or you don’t like investing in companies that start with the letter A. All that does not matter, you are here to make money. Invest wisely by analyzing the financial statement and where the trajectory of that company is going.
11. Never sell a stock when it’s low. If you invest in good companies stated above, these companies has always recovered and increase their stock price significantly after the turmoil.