Why Invest in Stocks?

Isn’t stock market investing just gambling? Isn’t it highly risky? These are two common questions that many people have. To be honest, there was a time where I thought this as well. The truth is that the answer could be yes to both if you don’t know what you are doing!

Gambling versus investing: If you buy a stock without any sort of reason to buy the stock, in other words you are acting on a “hunch”, then that is gambling. It wouldn’t be much different than placing bets at a blackjack table in Vegas. If, however,  you have good fundamental reasons to believe the stock is going higher, that is investing. Your success will depend upon how correct your reasoning is.

Can individuals really successfully pick their own stocks? Shouldn’t you let a professional do that? Here again, the answer is dependent upon the approach you take.

There are two major ways that people invest in stocks- either by buying shares themselves or by purchasing a mutual fund/index fund. The difference is that mutual funds and index funds are made up of lots of companies that the fund manager has bought. You pay the fund manager through fees to do this for you.

If you buy stocks yourself, you do not pay those management fees and you are in control of what companies you own. So which way is best?

The answer depends upon YOU! If you are not going to put in the time and effort to learn how to invest and you are not going to put in the time and effort in researching companies, then buying mutual funds or index funds is probably the way to go. If you are willing to put in the time and effort, then buying stocks could very well be the right thing for you.

I personally believe that anyone who is willing to put in the time and effort can learn to invest on their own. But it will take time and it will take effort.

My strategy is pretty simple and straightforward for how I pick stocks. I have been doing it for about 10 years and I have learned what works for me. I focus on finding good quality companies that are selling at a discount. I like companies that have meaning to me, because that will make all the work that I have to do researching the company more fun!

Here is the acronym for how I pick stocks:

Story- what is the story with this company?

Technicals- what do the technicals look like?

On-sale- is the stock a bargain?

Competitive advantage- what makes this company different than their competitors?

Know- do I know and love this company? Does it align with my values?

My goal is to teach you more so you will feel comfortable enough to get started. I will shoot straight with you and tell you about the mistakes I have made and what I have learned. To follow and receive my blog posts, don’t forget to sign up on the homepage!