One of the hardest things to do in individual stock investing is learning how to pick stocks. It is a skill like carpentry or playing the piano that some people have, some people don’t, and that you can get better at with time and experience. In my upcoming book, Investing to Win, I provide an investing process where you put the odds way into your favor. So much so that you have a very small chance of losing money and you will be able to predict your returns within a range (of like 8 to 12%). This all assumes that nothing really radical happens with the whole economy and things continue to work the way that they have for the last 150 years. It is possible that things could change (like if the US falls apart and things are no longer safe enough to have normal markets, changing all of the rules), but sometimes you just need to go with what you know and not worry about the doomsday scenarios.
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Part of the book is dedicated to individual stock investing. While a lot of financial planners steer investors away from individual stock investing, they can be very useful if you use them right. In Investing to Win, we use individual stocks as really long-term investments, choosing companies that we think are well managed and have a great product, then assume that if we hold them long enough to average out things like world wars and COVID pandemics, we should see returns above those provided by the markets. We’re looking at holding for ten, twenty, thirty years or more. This is like picking which athletes will score more points or rush more yards in football games over their careers. There can be surprises and sometimes things won’t work out, but in general you can look at the records of student athletes and figure out which are more likely to continue to do better than the others.
Like sports, there is skill involved in running a successful company. Some CEOs have it and others don’t. Like a winning team, the right aspects have to be in place for a company to do well year after year. Some companies are set up to grow earnings every year, where others will just churn around and never really go anywhere. Yes, there are some exceptions, but if you pile up enough of the right kinds of companies and you hold them for a long time to allow the random events to filter out, you’ll do better than if you just buy everything, which is kind of what indexing is.
Finding these companies takes the right tools, experience, and skill. One of the tools is stock screens, where someone has taken the huge list of available stocks and then chosen the diamonds in the rough (or, in some cases, the polished diamonds that will continue to shine). This is something we’re going to start providing in The Small Investor for a small price. To start, we’ll have “SmallIvy’s Picks,” where I’ll choose about twenty stocks that I think fit the Investing to Win strategy. That is, if you buy then and hold them for long periods of time, they should grow and keep growing. Things may change over time as companies change and develop, but I’m trying to find the companies that have staying power and will do well long-term.
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Of course, there will be some duds. I’m not perfect and I can’t foresee the future. Once in a while you think you have a QB that will go on to win game after game, but then he gets injured or involved with the wrong sorts of people and flames out. I’m sure I’ll get a stock or two that will go nowhere. But the list should provide a set of good candidates that have the right characteristics if you want to follow the Investing to Win strategy. (Pre-orders starting soon for the book, to come out in the March time period, in case you want to know what that strategy is.) Starting from that list, you can then choose the ones that you want to study further (do your own research) and maybe invest in. I’ll also add some information on why I pick each company so that you can see the methodology and the characteristics I’m looking at.
The cost for accessing the list each time will be a flat fee of $20. Because it will not change very often (if it did, I wouldn’t be picking long-term investments), I wouldn’t expect someone to pay to access it more than maybe once or twice a year. Between access times, you could just use the list you got before. Let me know if this sounds interesting to you. I’ll start working up the first list during this holiday season and have something ready to go after the start of the new year.
Wishing everyone a blessed Christmas. Best wishes for whatever holiday you celebrate if you are not Christian. And a happy New Year to all.
Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.