I know eh? Such a simple tip. Why would I even bother posting such rubbish?! Well, you will be surprised at how some investors (even the big names!) have made money over their careers. It is not always about investing in the hot hand or latest fad, but about investing in something you actually like. When you like something, you will research with passion. You will try to go into the core of the business and see what it is all about. This is when you make your best investments. This is true for any part of the business world not just stocks. Like it and watch as you make money.
Invest in what you know, like and understand. To quote Peter Lynch: "Your investor's edge is not something you get from Wall Street experts. It's something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand."
Good point. Former restaurateur Nelson Peltz became a billionaire by investing in publicly traded food businesses. Boone Pickens did the same when he sold out of his oil company and began buying the stocks of other energy companies.
Although this may be obvious information you have given u sit is still important to remind us. Too often I find myself wanting to purchase a stock in a certain company when I realize that I am not even that passionate about the company. It is critical to know the company well and a supporter of them if you wish to succeed in the stock market.
Sometimes the most obvious things are overlooked. We tend to like to complicate things and forget the basics.
I like strippers however I cant find a stock for them just yet. Maybe one day. That is a good tip. People like to complicate things when the obvious solution is right in front of your eyes.
I have to disagree. Yes you do need to search deeply and take a good look at the company. But this doesn't mean that you can't do the same to a company that you aren't super passionate about. Obviously knowledge about the business sector is a huge advantage and allows you to estimate which company has a good chance of making it and which doesn't. But you should NEVER invest just because you like the company or their products. You need to invest because you think the company has a future, not because their product pleases your personal taste. So far, during my quite short investment career, the ONLY really bad investment I have made is the one I made because of my feelings towards the company. I wanted to own a part of that company, so I bought it. It didn't look that bad, but I know that if it was a company that I had no particular interest in I think I wouldn't have touched it. And now it's sitting in my portfolio with a big fat red number in the "profit" column. Knowledge about the sector is good, but investing based on what you like is not.
I agree, it takes more then simply "liking" a company. Hey, you win some you lose some. Thats how it works. In the end, as long as you have more in the win column that is all that matters, everything else is just noise. Although, it's not fun to take big hits.
I suppose it depends what you're looking for. If you're looking for growth then some of the things you "like" may already be well established and less likely to grow further. That said, they usually have some stability and a dividend. Now, if you're on the hunt for one of those up and coming growers then it's usually hard to catch wind of it before the rocket takes off (if it does). Tesla completely took off in such a short period of time. I wish I liked them at the time enough to invest, haha.
Others may do things differently, but I have two rules: 1) Only invest in things I understand, and can make an accurate prediction on what it will take to make the stock move, whether towards the black or the red. 2) Make a plan and stick to it, and keep emotions out of it. I have a story I like to tell because it was a great, albeit expensive, lesson. Six years ago I started trading biotechs; I did months of research to learn a bit about the nature of the sector and what the process looked like to bring a drug to market. After my research, I made the plan that I would purchase stocks that had cleared their Stage III clinical trials and had a PDUFA date on the calendar(the date when a drug could be approved for sale by the FDA). Depending on the hype around the drug, the plan was to hold it until about 2 weeks before PDUFA, and historically I could expect a 10-15% return as the stock ran up in anticipation of approval. Got it. So after doing this successfully a few times, I felt pretty good about myself and bought a stock with a cost basis of about $7500, a lot of money to me at the time and a large percentage of my trading capital. I watched it run up to just above $10,000 over just two weeks, and I was ecstatic. At this point, my plan dictated that I should sell and walk away........except I didn't. You see there had been a bunch of approvals lately, and stocks were increasing tenfold over night. I sat there, with my tiny lizard brain, and I thought, "Well, $10,000 is good! But you know what would be better? $100,000. I'm sure it will get approved!" (I had no idea, I'm not a chemist, I don't work for the FDA, I still don't ever know if anything will be approved). So... I held it. And the company received a 'complete response,' which if you're not aware is basically a letter from the FDA telling the company everything they need to fix before they reapply. Relative to the stock price, however, it's a rejection- I went from $10,000 to $4,100 in a matter of seconds... I could only watch it bottom out as it sped past my stops, because obviously in retrospect, if it's plummeting, who's going to buy it from you? I had no idea something could move that fast. There's happier stories, and I did eventually make that money back, along with quite a bit more through some very exciting transactions, but those didn't teach me the same lesson that losing 60% over the equivalent of going downstairs for a cup of coffee did.
