2020 has probably been the weirdest year that i’ve invested in ever since i started investing many moons ago now i got ta say i feel sorry for those new investors out there who are just getting into the stock market because it’s very hard to navigate these dodgy waters.
If you do not know what you are doing, but that’s. The reason why i’m making this video i want to provide a framework that is going to help you steer through these. Let’s just say interesting times and not get burnt.
Now it’s, not going to make you an investing genius in one video, but what it will do is get you on the right pathway to investing well. During volatile times, i’m going to share with you five tips that i use buffet users, the best investors use them to beat other investors and win long term.
Let’s, get straight into it. [, Music ], one of the things that is going to be separating the average investors from the quality investors during these times is those who can handle emotions. Okay, here’s, an analogy.
Jordan peterson advises that we be the reliable ones at a relative’s funeral it’s, important that we take that advice further and we relate it to investing, particularly investing in and after a market crash.
You see. This is the mindset that ninety percent of investors take on when they see their stocks go up. They feel very happy. They go tell their friends at the bar, how much money they’ve made. They check their stocks weekly, if not daily, their emotions are all caught up in the ups and downs of the stock markets.
However, the small percent of investors that do the best are the ones who do the opposite of what those guys do. The investors that win are actually happy when their stocks go down, because it means it’s, gotten cheaper, so they can buy more at a cheap price over the long term.
They know the cheaper the price that they buy into stocks. The higher their returns will be it’s because of this exact concept. That buffett says you’re dealing with a lot of silly people in the marketplace.
It’s like a great big casino and everyone else is boozing, buy low, sell high. Unfortunately, most investors do the opposite: [, Music ]. If you want an advantage over other investors, if you want to be getting those high level returns, you need to be investing in areas that you know well.
So what i recommend is you take a step back and you assess the areas that you do know. Well: okay, if you’re, a young guy, it might be gaming, artificial intelligence, social media, some type of technology business.
If you’re older, your advantage might be in businesses that are more mature. Perhaps hospitality travel wine food. You know something along that nature buffett. He only sticks to those more mature business models that he knows well the likes of sees candy, which sells sweet products that business model has been around for ages and buffer understands it all the likes of insurance, which buffett put many hours into getting his head around.
He knows that game so well that he can pick the companies that are good investments and you should be doing the exact same thing as buffett. As i say, if you’re young and you like gaming, well, you probably have a better idea than most of what companies that are going to lead in the future and what industries will take off that’s.
Why one of peter lynch’s? Most famous quotes, is so simple, but so genius, he says, know what you own and know why you own it. You see most investors. They want to make money in every industry. They want to talk at the bar to their friends about all of the companies that they own, but rarely do they stick to the industries that they know well rarely do they understand exactly what it is they own and why they own it.
That’s. Why you shouldn’t, be like most investors, [ Music ]. If i just got a random person, who’d, never played poker before and i said, do you want to join me and my friends for a game or poker will each put in 500? That person will be stupid if he said yes to the game, because he’d, never played before and he was gonna get creamed and lose money, and if we take that and apply it to the stock market, you would be amazed at how Many beginner investors, don’t, actually know the basics to making an investment, and what inevitably happens is they get creamed after one, two or three years, if you’re new to this game of investing in the stock market, particularly in these Risky times 2020, here’s, some basics.
You need to know: okay, the p e ratio, one of the most important metrics, to know. Basically, it measures how much you pay for a stock relative to how much it’s, bringing in another thing return on equity, a great metric for measuring how efficient a business is at generating profits.
Do you know about stock market orders? What a limit order is a market order, a stop limit order. You need to know these things before investing. You know. How is your understanding with a range of different fundamental strategies that you can use? Aka warren buffett strategy of value investing buying at a price below intrinsic value.
Do you know about the dividend aristocrat strategy, a group of stocks that you can dollar cost average into and beat the market long term, at least according to history? It’s. Important that you get your head around these fundamental strategies, these little tactics that you can use get your head around.
The p e ratios before you become an investor [, Music ]. This is one of the simplest rules to invest in, but one of the hardest rules to follow most investors. They are obsessed with the day-to-day week 2 week, news of the stock market.
The thing is, you get some type of dopamine hit. Every time you receive a piece of news, this leaves 90 of investors hooked on the short term, going ons of the stock markets. Now i wouldn’t have a problem with this, but it does have a negative effect on the way you invest and ultimately, your investing returns.
One of the problems of looking at the very short term is you don’t notice, the long term patterns that you are going through. If you look at a week, or even a month in the stock market, these are normally tiny dots of a longer term pattern that is happening so as an investor, if you are attached to the short term, you’re, going to make decisions based Around that and overall, it leads to worse investing returns.
This is why buffett says only buy something that you’d, be perfectly happy to hold if the market shut down for 10 years, don ‘ T worry about the everyday news, and don ‘ T worry about the minutiae, [ Music ].
Now the next thing that you really want to be getting your head around is market cycles, especially in 2020, when we’re in the the later stages of the cycle. Now, what i’m talking about is getting to know what stocks do well, in which period.
Let me share with you a bit of an old school graph which will help you do so so, as you can see, during the early to middle stages of the market cycle, the likes of transportation, technology and capital, good stocks tend to do well.
Why? Because things are starting to expand, the economy is starting to heat up, so transportation is more required. Technology stocks are normally selling for a song during these times and they can take off big aka.
If you invested in netflix tesla amazon 10 years ago, was the time to do so, just when the market was starting to heat up, but during the later stages of the cycle, the more conservative stocks start to work better, the likes of consumer non-cyclicals and healthcare.
So why is that? Well, because even in a market downturn, people still need to eat, they need toothpaste, soap, clean water, etc. So consumer non-cyclicals are safer to own. They also need their health taken care of so healthcare stocks during the latter stages also work well – and this is what i’m talking about as a beginner entering into the stock market.
You need to be getting your head around these things. You need to know what stocks do well and when, as the saying goes, you can buy the strongest stock in the world, but if it’s in a weak sector, you can lose that’s.
One of the reasons why i like to follow ray dalio, he gives historical evidence and he relates it back to today to give us an idea on where we are in the market cycle, and then i can organize my portfolio appropriately for market conditions in 2020.
So if you’re, a beginner investor, obviously i’m sure you wish you started 10 years ago when the economy and the market was in the early stages, but at the end of the day, all you can focus on. Is the market conditions that we are currently in and these little tips that i’ve shared with you? They’re, going to help you navigate the waters for these unique market conditions in 2020 and going forward.
I wish you the best of luck, everyone and i hope you can get those high investing [ Music ] returns. [ Music ], you