Intro
The 8-Step Beginner’s Guide to Value Investing: Featuring 20 for 20 - The 20 Best Stocks & ETFs to Buy and Hold for The Next 20 Years: Make Consistent Profits Even in a Bear Market by Freeman Publications
Steps
- In the short-term, prices are fuled by emotion. In the long-term, prices are fuled by math
- Remember to account for inflation when analyzing your investments
- Only invest money that you don't need for the next decade
- Risk is defined not by the asset class of your investment but by your expertise evaluating it.
- You must be abel to mentally separate paper losses from real losses
- Long-term investing has multiple advantages over short-term trading.
- Just because you own a lot of differient companies does not mean you are diversified.
- When analyzing a business, remember to take into account the potential downside risk.
- The presence of a divident is not an adequate substitute for a thourough evaluation of the quality of management.
- Don't invest in the hype. Examine the underlying business and industry prospects instead.
Step 1 - Short-Term vs Long-Term
Buy at a good price, hold for a long time
Step 2 - Inflation
The value of a dollar today is less than yesterday, choose investments that increase faster than inflation
Step 3 - Investment duration
Invest for the long term and don't expect to use any of the money in the next N years
Step 4 - Risk
Risk Factor # 1 - Time
The more time you have to analize the markets, the more you can take on risk with individual stocks. The less time you have to analize the markets, the less risk you can take on and should use ETFs.
Risk Factor # 2 - Your Expertise
Simple can make great returns. Ex Soutwest Airlines = 110% / yr but little press vs FANG.
Risk Factor # 3 - Emotional Risk tolerance
10-15% paper loss, then stick to ETFs 30%+ paper loss, stocks are ok
Step 5 - Real vs Paper Loss
Longer term, the higher the return the better the portfolio