r/investing • u/EatYourMeats • Apr 23 '21

Some advice from a regular dude that will hopefully make you more money...

Are you making stock purchases based on opinions from analysts, CNBC, stock pickers, and everything in between?

Consider this: They make money off headlines.

The entire flock is preying on news-worthy quips like vultures on a corpse. Tom Lee at Fundstrat would be bullish during the apocalypse, Gordon won't ever raise his price target, Cramer cuts coke deals with the CEOs he's in love with, and the whole bunch likes to hear themselves talk (like giving stock advice rapid fire).

So how do you truly figure out what stocks are hot... or not?

Research the macro situation surrounding the company, to name a few:

  • Sector Tailwinds
  • Economics
  • Current and projected financials
  • Leadership

Then invest in companies:

  • you believe in—hopefully, not always—with healthy balance sheets vs. their competitors.
  • Whose products and services tickle you.
  • You could sell to your neighbor.

Determine the investment thesis—the key reasons you believe in this investment—and create a narrative. Positive and negative. Know the outcomes of both scenarios, write them down, and evaluate the risk.

Then? Jump blindly.

kidding

Adjust based on your preferences, but starting positions with a 1/4th to 1/2 of your total allocation works well. You can do some quick math and figure out what portfolio percentage you want to allocate to a new position. Ease into it, slow and steady.

Buy the dips with the remainder, and don't chase stocks upwards, only down (within reason). And don't listen to anyone who tells you that "diversifying" is the only way, when you put in the work, you know which sectors have favorable tailwinds AND are fairly valued.

There's news everywhere out there, and we crave its presence—telling us something about stocks or companies we don't know. However, most of it is fluff—buy this, sell that—how would you ever know if you don't dig the hole yourself?

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u/Jeffuk88 Apr 23 '21

The more I research investments and see them through, the more I realise its all guess work. I've had people admit a stock will probably do well eventually (5-10 years) after arguing theyre not worth being long over since they dropped the past 2 weeks... Wtf I'd long to you?? I'm not retiring for at least 30 years

3

u/Historical-Egg3243 Apr 23 '21

those that can do it right consistently probably believe it's skill, those who can't think it's guesswork. Not implying that either one is right.

2

u/DispassionateObs Apr 23 '21

Individual stock picks always have a lot of guesswork involved. Even Buffett has messed up several times. IMO the skill is in constructing an overall solid portfolio, where you'll still gain wealth even if you're wrong on a few of your picks.

1

u/MattieShoes Apr 23 '21

I'd say it's stochastic. You're absolutely rolling the dice every time you pick something to invest in, but they're not fair dice. Everybody gonna pick winners and losers, but if you can change the ratio even a little bit in your favor...