How You Should Invest In Stocks Like Buying A House?
Summary
You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time. - Charlie Munger (Warren Buffett's business partner)
Dear Investors,
Remember when you bought your first house? Well, I asked this question because I strongly believe that you should invest in your stock the way you would with your house. After all, over 95% of people managed to make money on a house that they keep for the long term.
That being said, let us go through the process that you would buy your house and see the similarity to investing. In your home buying process, you tend to go through careful research and due diligence. That is to say, you first drive through the neighborhood. And after you're satisfied with its safety, you'd get a home inspector to search for dry rots, leaks, foundational issues, etc.
In stock investing, I strongly believe that you should put in similar time and effort for proper due diligence. The more research that you conducted on a company, the more you'd understand the?investment stories ?(i.e., the investment thesis). That way, you're not simply buying a stock ticker. Instead, you're making a long-term investment purchase that would best protect your capital while giving you upsides.
Next, you would look at many houses and take a pass on countless ones that you don't like. You don't simply jump on any opportunities. In a period of several months to as long as a year, you would look at countless homes before settling on the one that you like. Throughout this process, you'd develop an "intuition" for the right home. As you purchase your second and third homes, you'd still have to conduct research yet it would take you much less time. After all, you already developed an instinct for home acquisition.
If you pick stocks properly like Warren Buffett and other icons, you'd be constantly searching the market for the best opportunities. Keep in mind that you don't simply pull the metaphoric trigger on a whim. Instead, you research stocks year in and year out. Over time, you refined your intuition to know which stocks would have the best chances of surviving bear markets to deliver you?substantial upsides ?in a bullish cycle.
Now, the sophisticated home buyer would make big purchases in a "buyer's market." In that real estate cycle, the home inventory is quite abundant. Hence, the tremendous supply with low demand would give you the best bargain. Notably, even if you bought your home in an upcycle, you can still manage to make money on it. That is, if and only if, you hold your home for the long term.
A similar situation also occurs in stocks. If you purchase deep bargain stocks during this bear market cycle, you'll enjoy the most upsides. After all, you can pick up your shares of fundamentally sound companies at dimes on the dollar. Similar to the home buying process, you can still make significant money on stocks even if you purchased them during the bull market. Again, you simply have to wait longer for your stocks to appreciate. If you bought most of your shares in the last few years, just wait for several more years for your stocks to appreciate. While no one can predict when the next bull cycle will come, it will certainly come. At that time, you'll enjoy your profits for the time and efforts you put into your investments.
In summary, you all should invest in stocks like how you would buy a house. Be in it for the long term. Make an effort to do thorough research and due diligence on your stocks. You can leverage researching services like what I provided in Integrated BioSci Investing at Seeking Alpha to assist you. Notwithstanding, you have to spend the time to understand what you purchased. Lastly, if you want the best results, make your biggest purchase during a bearish market cycle.
To Your Success in Investing and in Life,
Dr. Harvey Tran
Disclosure:?I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure:?As a medical doctor/market expert, I'm not a registered investment advisor. Despite that I strive to provide the most accurate information, I neither guarantee the accuracy nor timeliness. Past performance does NOT guarantee future results. I reserve the right to make any investment decision for myself and my affiliates pertaining to any security without notification except where it is required by law. I'm also NOT responsible for the action of my affiliates. The thesis that I presented may change anytime due to the changing nature of information itself. Investing in stocks and options can result in a loss of capital. The information presented should NOT be construed as recommendations to buy or sell any form of security. My articles are best utilized as educational and informational materials to assist investors in your own due diligence process. That said, you are expected to perform your own due diligence and take responsibility for your action. You should also consult with your own financial advisor for specific guidance, as financial circumstances are individualized. That aside, I'm not giving you professional medical advice. Before embarking on any health-changing behavior, make sure you consult with your own doctor.