Before I ever invested a single penny, I worked as a river guide making barely enough to keep a roof over my head. When I got the opportunity to learn how to invest, let me tell you, I jumped on it, and I’ve done pretty well for myself. I’ve gotten and given a lot of investing advice over the years but today, I’m going to give you the best I’ve ever gotten. I hope it’s as helpful for you as it was for me.
1. Don't Look at Stock Prices Daily, Be Surprised in 10 Years
On a day-to-day basis, Mr. Market can definitely be pretty moody. Stock prices fluctuate up and down each minute, sometimes dramatically.
As Rule #1 investors, these short-term fluctuations aren’t of much concern to us as long as you have invested in a wonderful company that we know is going to grow in value. Watching these fluctuations as they happen can be stressful for anyone - and we all know that emotion and stress leads to poor investing decisions.
Instead of checking the price of stocks every day, be surprised in ten years at how much you’ve made. If you invest in a great company at an on-sale price, there's simply no reason to worry about its day-to-day fluctuations in price.
2. Live Off One Income, Invest the Other
If you live in a household that brings in two different incomes, living off of one income and investing the other is one of the best financial decisions that you can make.
In many cases, families are able to live comfortably off of one income and use the second income for frivolous spending.
If it's possible for you to keep the bills paid and maintain an enjoyable lifestyle while spending only one income, you'll be able to invest a huge amount of money over the years, setting you and your spouse up for a very nice retirement.
3. Buy Businesses, Not Stocks
When you’re considering purchasing stock in a company, it’s very helpful to think of it as buying the entire company. After all, you’re purchasing a portion of the company, and if you wouldn't buy 100% of a company, then you shouldn't even think about buying a tiny percentage of that company either.
Approaching investing as if you were purchasing the entire company outright rather than just buying stock in the company forces you to ask the right questions.
Is the company one that is worth owning? Is it one that you would be proud to own? If you had billions of dollars to spend, is this still a company that you would purchase entirely?
When you take a big-picture look at a company, these are the questions that can help you make much better investing decisions and determine how to invest.
4. Treat All Investments the Same
Investments can take many different forms, from stocks to real estate and everything in-between.
However, when it comes to the investing strategy that you use, all investments are the same. An investment is something that makes you a good return in the long run.
Purchasing a house or investing in a small business that you start should be approached with the same strategy that you use to invest in companies.
Unfortunately, a lot of people miss this. There are plenty of people who are highly successful in the stock market, who buy real estate at full price, are impatient with their money, and spend when they don’t need to.
No matter what you are investing in, your approach should remain the same.
Is the investment something that is still going to be around in ten years? Is it going to grow in value over that time? Are you paying a price for the investment that is discounted compared to its true value?
Succeeding in investing ultimately comes down to finding the best investments that work for you.
Everything I teach about investing in companies still applies to every investment that you could possibly make.
5. The Best Investment Decision is Usually "No"
Opportunities that are truly worth capitalizing on are much rarer than you might imagine. That's not to say that they can't be found, or even to say that they can't be found on a regular basis.
Finding a company that is actually worth investing in takes time, research, and patience.
With this in mind, the best investment decision is usually going to be "no".
If you’re going to be a successful investor, you have to get comfortable with the idea of turning down companies that you think you might be taking a chance on. When the opportunity comes, get out there with a washtub, not a thimble.
Don't feel as if you have to invest all of the cash you have available right away. There's certainly nothing wrong with sitting on cash until you find an amazing company AND the price is right. Be confident in your investing choices.
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How to Pick Rule #1 Stocks
5 simple steps to find, evaluate, and invest in wonderful companies.