Investing: Putting it all Together

This month's investing topic is “Putting it all Together”.

I’m going to outline how to put all the information you’ve learnt over the last several months together so when the time's right, you can be ready to buy that stock.

Have you ever felt pressured into investing in a certain stock because “everyone else” seems to be doing it?

The key with Rule #1 Investing, aka. Value Investing is recognizing when you’re feeling this pressure and then sticking to the principles you’ve learnt. Remember, you’re investing in stocks that match your values and this requires you to be patient and courageous. 

You don’t buy a stock just because everyone else is buying a stock, or because you don’t want to miss out.

Like learning anything, learning to invest is a practice. It takes time to learn before you can become comfortable with buying a stock. You need to understand what you want and then know when the opportunity is right to get it. You can’t be swayed by other people's greed or fear. You won’t be left behind if others are at different points of their investing practice than you. It’s not a competition. Investing is not about how quickly you can buy stocks, or about who owns the most stocks. 

“Investing is not about being smart; it is about knowing that what you’re buying will be worth more in ten years and being patient.”  - Danielle Town, Invested

You want to ensure you have everything in order so when the time is right, you can buy.

What to Have Ready so You can Buy that Stock:

• A great business 
• A buy price 
• Available cash
• An event
• Your emotions

A Great Business

Understanding if a business is great combines the first 3 principles of Value Investing. You only want to invest in stocks that are great businesses. A great business will consist of: 

• You being capable of understanding the business, 
• Identifying the natural quality the business has that provides an advantage for it
• Management that is honest and skilled

A Buy Price

As you don’t want to buy the stock at just any old price, you will want to calculate what a fair price for the business would be. This is the crux of Value Investing Principle #4 - understand how much the business is worth and then wait patiently until it goes on sale. This is the price that you’ll buy the stock at.

Available Cash

If you haven’t opened a brokerage account, now is the time. Try to find one that allows you to open a practice account as well so you can practice navigating through it and clicking the buttons. You’ll also need to have money ready in that account. Get in the routine of regularly putting money into this account so when the time is right, you’re good to go. This is called sitting in cash.

An Event

Keep an eye on the world/industry happenings for an event that impacts the price of your great business. Events don’t happen every day but when they do, it creates fear in the market, industry or for a particular business and this is when great businesses go on sale. When you start to see the price go down towards and get close to your buy price, buy some shares of the stock. If the event causes the price to dip even further below your buy price, happily buy some more. You don’t have to buy all your shares at once as you don’t know what the lowest price will be.

Your Emotions

Keep your emotions in check. It feels a bit counter intuitive and nerve racking to buy stocks when it seems that everyone else is fearful but trust all the work you’ve done about this great business.