Documenting my research journey

I am invested in the markets passively for the last couple of years and read about them from far aside. Now that I am contemplating to try some direct stock investing myself, I plan to dedicate a few months to learn all the basic skills, frameworks, jargons and philosophies etc before I actually buy something in individual companies.

So I will start analysing some companies that I like and share my process and learnings here with everyone. Hope for some informative conversations about how to analyse, research and feel about the markets.

First post about some basic rules that I set for myself.

Only invest in things that I understand. This means most of my time will be focusing on consumer-related companies such as the internet, consumer brands, financials, some industrial companies. This also means that I won’t bother looking at smaller companies that I have never heard of.

Don’t try to be smart. I won’t try to time the market or have a strong firm view on anything. Markets will tell me when I am wrong. I won’t attempt to forecast and calculate my own intrinsic value. I found that when there are more than 3 assumptions that I need to make, forecasting becomes almost meaningless.

Focus on the greatest. I will only spend time on those companies which I think are the greatest. This needs to be great brands and products. Usually these are large established companies but we will see.

Don’t overpay. I learned this with Mr. Buffet. Some great companies have no doubt whose share price will just continue to rise and rise, but I need to make sure that I don’t overpay. This is going to be the hardest which is something I need to learn and develop over time.

A company can’t be a good one if I need to monitor it every day. A good company won’t waste too much of my time. If price swings too much, or there are too many news out of this company and I start to get lost, no, it’s not a good company for me.

Don’t object momentum. I will look for companies that have done well in the recent past and ask myself the question are they going to do well into the future. I won’t attempt to be contrarian and assume that I know something that others don’t. Lots of active managers’ job is that, not mine. I follow the trend and ride through it.

Learn from the best. There are still many brilliant active managers out there. I respect and copy some of their holdings. Nothing wrong with it.

Boring is good. I think the end result of my above approach means that I end up owning some boring companies and people may say: duh, that’s it? Yes, I am fine with holding boring companies as long as they fit into my rules above.

That’s it for the first post. As you see, my process is highly subjective and may not apply to others. But that’s fine. I hope to make some friends along the way who share a similar approach as mine.

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May I ask why you want to go through all that when all research shows that it is almost impossible to outperform the market over the long term? Seems like you are investing into deliverately losing money.

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Exactly why I need some months to get to learn everything about picking individual securities. If I don’t “feel it” in a couple of months, I will just stick to ETFs.

By the way, investing in passive ETFs will never outperform the market. We always pay a fee and the best an ETF can do is to track the market. So in terms of outperforming the market, ETFs are definitely zero change of doing that.

However, this is more of a fun exercise for the money that I can set aside to put in individual stocks.

Nice thread, I support your learning experience, I’m on the same path and really interested how you get on. I get the passive income approach and I get exposed to that through my pension. I personally want to develop ability to assess individual businesses and invest that way too.

Buffett states indexing is good for those not seeking to analyse businesses and munger goes further, diversification is protection against ignorance which could also relate to index investing. Maybe a bit harsh.

Anyway look forward to hearing your approach

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