Stock Investing: My Approach

Stock investing can be daunting. With the financial news all over the place, it's overwhelming to know what to do. Plus, school taught us that there's right and wrong answer. In this realm, there's a lot of "it depends" situations.

First off, there are certified professionals with access to more tools and resources at their disposal. Second, set your limits and boundaries.

Only invest what you're able to risk without putting yourself in a financial bind.

Again, this was my approach to navigating a highly complex financial ecosystem. Use this for informative purposes only, but feel free to comment!

A stock market chart illustrating positive growth trends.

My Understanding Stock Investing

Before diving into strategies, it’s crucial to understand what stocks are and how the stock market operates.

What Are Stocks?

You're essentially buying a small piece of the company. Technically, you're giving a company your hard earned cash for their equity. These are also "paper" assets.

Again ... You're buying a business!

How the Stock Market Works

Most people buy stocks, let the market help those stocks grow, then sell for a gain. Supply and demand drive the price at any given time.

Apple comes out with a new iPhone, the company is perceived to have more value thus the stock price increases.

Ford isn't selling their EV trucks as well as forecast, so they take costs to focus on internal combustion engine trucks - the stock price goes down.

Increase your assets and your net worth!

Instead of coming up with arbitrary goals that should be tracked, simply strive to increase your Net Worth. It's simply...

Net Worth = Assets - Liabilities

When you increase your Net Worth, you'll have resources at your disposal at any given time. If half the year is spent working, simply put it away. Buy and hold those assets.

When you decide it's time to pull the trigger on a big money, you can act fast.

Work to be in a position to have the resources to go on that trip, buy that car, or any other expensive move tomorrow.

Oversimplified Stock Strategies

1. What is valuable?

The deeper question is what to people and businesses need to succeed and thrive?

Products and/or services that...

Save time

Increase performance and efficiency

Entertain the masses

Essential to daily life with incremental improvements

2. Boring, consistent, and steady wins

Don't chase investing in the next (insert hot company in the news). Retail investors simply don't have the access to the information on the next billion-dollar. The sad reality is that by the time you see it on social media, big money is already already in play.

I tend to buy boring but mostly stable companies that everyone recognizes. I kept buying and held them 8-10 years. Here are some that I've bought and held.

Verizon. Everyone needs data, 5G internet, and a mobile phone! They do work to continue building America's telecommunications infrastructure. This company has paid close to 7% dividends for years, it's reliable to hold.

Apple. Long time winner, the iPhone's here to stay. Society at large is still creating content on Apple's hardware.

Tesla. Though best known for their EVs. Every Tesla on the road is making their Full Self-Drive better, and they're working to improve Lithium battery technology for more EVs and industrial power storage. Look into Megapack, that product hardly makes the news.

3. Consider Index Funds and ETFs

I'm a fan of VOO.

Also, I'm for investing a portion of my wages on this reliable ETF.

It won't make you wealthy overnight, but you'll enjoy the average 7% return over the long term.

4. Invest for the Long Term

If you broaden your timeline, the stock market consistently goes up!

Think ... What will still be around and successful in 5-10 years?

5. Stay Informed

This is difficult with all the noise on social media. But I listen to some of the events in the financial and geopolitical news that impacts markets. See my other blog post on what I listen to during breakfast and the commute.

• The Middle East

• Tariffs

• The state of rare-Earth metals

• Oil Economy

• Wars

• Immigration policy

Now peel the onion and think how this can impact your life and your finances.

• Oil and gas prices

• Supply chain costs

• Tariffs on cheaper goods from overseas, and your daily shopping

• Food costs

• Labor prices for services we need - Plumbers, Electricians, Construction, and many others!

6. Buy Stability, Let Investments Buy Risk.

Your hard-earned cash should be invested in secure and stable growth. In the past few years I bought VOO (tracks the S&P 500), Warren Buffett's Berkshire Hathaway Class B (BRK.B), and Verizon (almost 7% dividend for years).

I've always considered the Magnificent 7 as risky. Everybody is invested in them. However, there were moments where Google, Amazon, Apple, and Tesla announced forward stock splits. I sold those stable investments and bought into the riskier stocks. Gains buying risk is less of a gamble and I could feel like I took on an opportunity than pulled the trigger with hope.

Managing Your Investments

1. Monitor Your Portfolio

I check it daily, but I don't panic on the ups and downs.

I've seen six-figure swings, that can make most folks sweat.

Morgan Housel stated that market swings are the FEE for being in the market.

2. Rebalance When Necessary

I don't stick to rigid allocations like 60% Stocks, 40% Bonds. Everything is an opportunity cost and always a test of your risk tolerance.

My rebalancing would be to either buy slow and stable vs. high growth and risky.

5. Don't Panic Invest or Divest

The 24/7 financial news can make you do this.

Don't buy when the stock is hot. By the time you decide, others have exploited those gains.

Don't sell when that market has bad news. Selling at a bad time only locks in your losses.

6. FOMO? Put skin in the game!

Want try buying a stock that's trending hot? Buy 1-5 shares and see what happens!

You'll really monitor the costs and benefit of your own portfolio.

You'll have a small market position.

It will be easy to buy or sell later.

Common Mistakes to Avoid

1. Timing the Market

The professionals don't always get this right. Disciplined approaches are what pays. I'll use this quote again: "Time in the market is more valuable than timing the market."

2. Be Cognizant of Fees

Know the cost of fees with whatever service you sign up for.

Early on, it's good advice to avoid fees. These days, trades and fees are very inexpensive going on your own. When I started with Scottrade in 2006, each trade cost $7. Now it's practically free.

Gurus mention avoiding fees. Though they may be high, know the benefits they can provide. They don't guarantee high returns, but they provide access to experts, funds, and upcoming strategies that may likely be lucrative in the long-term. Remember that THEY WORK FOR YOU. You pay for their thoughts, insights and advice.

As you scale up and have more assets, it may be wise to speak to a professional to assist with management.

3. Following the Crowd

Just because everyone else is investing in a particular stock doesn’t mean it’s a good choice. Conduct your own research and make decisions based on your analysis rather than following trends.

News ... Remember, they make news to attract fear to gain more viewers which then attract more advertising. They don't know your particular situation and how the present market impacts your unique portfolio and risk tolerance.

Conclusion

School doesn't teach anyone to invest. Whatever stage in life you're in, best to start small and build the habits make stock assets grow over time.

Know yourself and your risk tolerance. Stock investing isn't about picking the right stock that will make huge returns, it's about not messing up compared to more riskier investment strategies.

The best day to invest was yesterday. The second best day is to invest today. Time is a resource we don't get back. Take advantage of it.

How has your experience been?

What were your successes and "failures"?

What advice would you offer from your experience?