A Simple Number Tells You If the Stock You Own is Worthless

A Simple Number Tells You If the Stock You Own is Worthless

Is there a secret to find the great stock?

The answer is no, there are no secrets… but there is a process and there are steps, you just need to learn about them.

And like any other learning experience, it is a mix of trial and errors, intuition, and bit of luck.

After learning for few years, I arrived to a process to find great stocks.

So, what’s this financial key?

Simply put, I want a business with positive and reliable free cash flow.

Free cash flow is all the excess cash profit left over after a business pays all its expenses and taxes and after it reinvests enough cash to maintain and grow the business.

Remember, when you buy a stock, you’re buying a piece of a business.

It’s not a debt, and it’s not a preferred stock.

It’s equity.

And equity is a “residual claim” on the earnings of a business.

“Residual” just means the equity holder doesn’t get paid until everybody else gets paid. This is really important.

What does that mean?

It means, there’s nothing left over for equity holders until all secured and unsecured creditors, salary and wage earners, taxes, and preferred stock holders all get paid.

Only after all these obligations are met, you, the equity holder, expect your shares to be worth anything.

In fact, excess cash flows are the one thing that give your stock nearly all of its value.

It makes sense, right?

 

This is what makes a business valuable:

 

The ability to generate lots of extra cash.

Without excess cash, your shares are worthless.

Free cash flow is easy to find.

All you do is go to the cash flow financial statement

“cash flow” section,

and subtract “capital expenditures” from “operating cash flow.”

Sometimes operating cash flow is called “cash from operations”

or “net cash from operations.”

And sometimes, capital expenditures are called

“additions to property and equipment” or something similar.

Take software giant Apple (AAPL), for example in 2021,

Here’s how I calculate Apple’s free cash flow:

Cashflow from operations is $104 billion.

Let’s subtract $11 billion for additions to property and equipment.

This equals $93 billion.

That’s a lot of free cash flow.

Very few businesses generate as much free cash flow as Apple.

What’s interesting is most people have no idea how important this financial key is, so they’re unable to understand what an amazingly good business Apple really is right now.

To sum up:

1- Free cash flow is all the excess cash left over after a business pays all its expenses and taxes and reinvests enough to maintain and grow itself.

2- Free cash flow is important because it’s the amount of excess cash available for creating shareholder value, which is how you make the most money.

3- Free cash flow = cash from operations minus property and equipment spending. Both those numbers are on the cash flow statements inside a company’s quarterly and annual reports.

If you’re interested in learning more about investing in the stock market and want to be successful investor, then you should check out my FREE EBOOK that features the top books every investor should read.

Click here to download the Top Books That Every Investor should read

You Can Be a Stock Market Genius

You Can Be a Stock Market Genius

Do you like to be a stock market genius?

You can be one if you’d like!

Confused?

I’m actually talking about the book “You Can Be a Stock Market Genius” By Joel Greenblatt.

Have you read it?

It is a must-read book for everyone who wants to be successful investor.

“You Can Be a Stock Market Genius” is a comprehensive and detailed guide on the stock market that written by a successful fund manager.

It helps the reader find “Special Situations” in the stock market.

Throughout the book, you’ll find useful insights into how you can invest in special market situations and achieve above-market returns.

Joel Greenblatt explains why having a basic set of rules that one needs while investing in special situations is necessary.

Reading this book will help you to be independent thinker when it comes to investing, believe in your own work, not to trust the noise out there, and have faith in your own analysis.

The book is filled with several case studies that’ll help you understand why special situations in the stock market can help you find your next 2x, 5x, or even 10x investment.

Knowledge is power and stock market is not an exception,

Reading books is the best way to gain knowledge and learn from highly experienced individuals who’ve seen it all in the market.

Also, if you’re interested in learning more about the stock market and want to get better at investing, then you should check out my FREE EBOOK that features the top books every investor should read.

Click here to download the Top Books That Every Investor should read

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And if you are ready to take the first step, and invest in yourself, enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.

What others said about the course?

Dr. Wafaa has shared her personal knowledge and expertise and provided the necessary information to start the investing journey based on a solid foundation. Her style in teaching made it very easy to grasp the concepts and understand the information being provided.
The course contains excellent information and working tips that you can use in building your confidence as an investor. The workbooks provided during the course are a very helpful tool and will continue to be a great handy reference for future use. I am really grateful to Dr. Wafaa for this excellent course and I highly recommend it to everyone. It is really worth the investment paid for it.
Mohammad Adnan Taibeh, Head of Economic Optimization

The Course was a very informative, suitable for people who just started out or willing to start investing in the US Stock Market. The course covers a lot of investment principles and how to manage your risk. I would recommend people who would want to learn about the stock markets and finance in general and also people already have knowledge on this field.
 Abdallah Al Alban, Financial Researcher

The course is very professional in the true sense. The course content was distinctive, smooth, and at the same time rich in important and updated information. Starting from explaining the simplest steps that help any beginner to go through the experience with confidence, passing through daily updates of the most important tools and sites that can be used. I highly command the course, it includes everything you need to start your investing journey. I would really regret it if I missed the course!  
Abdallah Al-Ansary, Language and development trainer

So, take that first step and start your investment journey HERE.

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If you want to increase your financial awareness and be financially educated to secure your financial future, grap a copy of my book “What They Don’t Teach You In Schools about Money HERE

What others said about the book?

The title of the book says it all; the content of the book truly does explain life changing concepts and things they do not teach you in schools. It made me come to a realization that this would be a great class to have in a university, not just for finance majors but for all majors.

Dalal Ali

The book has cleared the age old myths and psychology revolving around attaining money and success.
It is extremely educative about the various forms of investment and market risks.
The book truly “teaches everything they don’t teach in school about money”.
Thank you Dr. Wafaa once again, for being so kind as to sharing your valuable knowledge in a nutshell with all of us. I feel the book needs to reach a wider group of readers.
 
Tina Noronha

Dr. Wafaa I just wanted to say that book is such an amazing, well written book, it really made me take a look at my spending and changed my mindset and much more its officially my favorite book!

Ghada Beshara

Be Careful Who You Trust, Be Suspicious When It Comes to Your Money

Be Careful Who You Trust, Be Suspicious When It Comes to Your Money

Have you heard before that 225,000 people have died “Iatrogenic deaths?”

According to the journal of the American Medical Association it is the third largest cause of death in the United States, Iatrogenic.

What does this word mean? Is it rare disease? Is it genetic mutation?

No, it is actually referring to an inadvertent death caused by a doctor or a hospital or incorrect or unnecessary medical procedure.

Why they don’t say so?

Because it does not serve a medical institutions interest to put it in plain language so average person can understand.

Same thing is applied o financial world,

For example, financial industry, charge you different fees, mutual funds one of them, they charge different types of fees,

you don’t know and it will be impossible for you to understand they are taking much more than you would ever imagine.

Why the financial industry or the financial advisor does not serve your best interest, lot of money should be yours, but they take it.

You have to understand that there is conflict of interest, most financial advisors paid more or less depend on how much you invest, they paid commission or bonus based on your investment.

I  lost lot of money from investing my money with the wrong people in the wrong deals and I do not want you to be in the same place.
Particularly, I invested with an individual who repeatedly told me: “You Can Trust Me.”

If someone is always rushing to tell you they’re trustworthy, it’s a sign they’re probably anything but.

As Robert Kiyosaki said:
“Safeguard your money, the world out there to take your money. Those people are smart, very well trained on how to persuade and convinced you, they are more powerful than you, so they can easily take your money, they are cute ad cudly. You have to know that thieves are not only those stole precious things and criminal in prisons, in real worlds they take different types.”

I am not here to scare you, but I want you to increase your financial awareness to see what is going on behind the scenes.

It is good to listen to other people investment ideas, but never let them convince you to get involved before doing your own research.

Here are few tips:

1- Never invest without a contract in place and be careful who you trust.

2- Check out their claims by looking online, reading about the company and talking to trusted advisors.

3- Be careful of someone calling you with lot of promises or begging you to invest in a sweet deal. These types of people are trying to stir up your emotions by selling you an improbable dream. Don’t let that happens to you.

4- Be aware of Ponzi scheme, it is an investment fraud where people invest and their return on the investment is paid from the money of new investors. So, people who invested in first were paid their return using the investment money from people who invested in the second year. A lot of people lost their life savings in this scheme.

Get rich quick scheme are a dime a dozen.

Don’t buy the theory: this is how life is, life is unfair, find the way to make it fair!

If you want to increase your financial awareness and be financially educated to secure your financial future, grap a copy of my book “What They Don’t Teach You In Schools about Money HERE

What others said about the book?

The title of the book says it all; the content of the book truly does explain life changing concepts and things they do not teach you in schools. It made me come to a realization that this would be a great class to have in a university, not just for finance majors but for all majors.

Dalal Ali

The book has cleared the age old myths and psychology revolving around attaining money and success.
It is extremely educative about the various forms of investment and market risks.
The book truly “teaches everything they don’t teach in school about money”.
Thank you Dr. Wafaa once again, for being so kind as to sharing your valuable knowledge in a nutshell with all of us. I feel the book needs to reach a wider group of readers.

Tina Noronha

Dr. Wafaa I just wanted to say that book is such an amazing, well written book, it really made me take a look at my spending and changed my mindset and much more its officially my favorite book!

Ghada Beshara

————————-

And if you are ready to take the first step, and invest in yourself, enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.

What others said about the course:

Dr. Wafaa has shared her personal knowledge and expertise and provided the necessary information to start the investing journey based on a solid foundation. Her style in teaching made it very easy to grasp the concepts and understand the information being provided.

The course contains excellent information and working tips that you can use in building your confidence as an investor. The workbooks provided during the course are a very helpful tool and will continue to be a great handy reference for future use. I am really grateful to Dr. Wafaa for this excellent course and I highly recommend it to everyone. It is really worth the investment paid for it.

Mohammad Adnan Taibeh, Head of Economic Optimization

The Course was a very informative, suitable for people who just started out or willing to start investing in the US Stock Market. The course covers a lot of investment principles and how to manage your risk. I would recommend people who would want to learn about the stock markets and finance in general and also people already have knowledge on this field.

 Abdallah Al Alban, Financial Researcher

The course is very professional in the true sense. The course content was distinctive, smooth, and at the same time rich in important and updated information. Starting from explaining the simplest steps that help any beginner to go through the experience with confidence, passing through daily updates of the most important tools and sites that can be used. I highly command the course, it includes everything you need to start your investing journey. I would really regret it if I missed the course!  

Abdallah Al-Ansary, Language and development trainer

 

So, take that first step and start your investment journey HERE.

Why Investing in ETFs is a Great Idea for Beginner Investor

Why Investing in ETFs is a Great Idea for Beginner Investor

Do you know that $100,000 invested in S&P Index fund 30 years ago,

Would be worth now $843,000?

And, $100,000 saved in highly yield bank savings account 1% annually 30 years ago,

Would be worth $134,969?

Saving money without investing, is the equivalent of the hamster who moves nowhere while running on the wheel, and tires themselves out in the process.

Saving without investing leaves you behind in the end.

The best and safest way to start investing is investing in Exchange Traded Funds (ETFs).

An ETF offers investors a way to invest in many stocks without buying them all individually.

It gives you the opportunity to invest in a lot of companies with less money.

Take S&P 500 ETF for example:

You can invest in companies in the technology, consumer staples, healthcare, financial, industrial, energy, and utility sectors by purchasing a single stock.

An S&P 500 ETF allows you to acquire pieces of Apple, Microsoft, Amazon, Facebook, Google, Visa, Tesla, Berkshire Hathaway, Johnson&Johnson, and many more all in a single stock.

In doing so, you are able to essentially become a part owner in all of the biggest companies with the best returns while minimizing the potential risk of losses.

An important issue you have to pay attention to when buying index fund:  THE FEES,

For example, an initial $10,000 investment in an index fund that earns 8% annually and charge 0.05% annual fees will grow to: $108,000 in 30 years.

The same investment in an actively managed fund that charges a 1% annual fee will grow to: $81,000

The fees you pay on your investments should be one of the first things you look for when choosing your investments.

Even paying just 1% in annual fees can drain your portfolio drastically over time.

When building your portfolio, prioritize using low cost index funds that charge less than 0.15% annually.

To learn more about ETFs and how you can get started invest in them, I prepare a FREE guide for you, Click Here to Download.

And if you are ready to take the first step, and invest in yourself, enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.

 

What others said about the course:

Dr. Wafaa has shared her personal knowledge and expertise and provided the necessary information to start the investing journey based on a solid foundation. Her style in teaching made it very easy to grasp the concepts and understand the information being provided.

The course contains excellent information and working tips that you can use in building your confidence as an investor. The workbooks provided during the course are a very helpful tool and will continue to be a great handy reference for future use. I am really grateful to Dr. Wafaa for this excellent course and I highly recommend it to everyone. It is really worth the investment paid for it.

Mohammad Adnan Taibeh, Head of Economic Optimization

 The Course was a very informative, suitable for people who just started out or willing to start investing in the US Stock Market. The course covers a lot of investment principles and how to manage your risk. I would recommend people who would want to learn about the stock markets and finance in general and also people already have knowledge on this field.

 Abdallah Al Alban, Financial Researcher

 The course is very professional in the true sense. The course content was distinctive, smooth, and at the same time rich in important and updated information. Starting from explaining the simplest steps that help any beginner to go through the experience with confidence, passing through daily updates of the most important tools and sites that can be used. I highly command the course, it includes everything you need to start your investing journey. I would really regret it if I missed the course!  

Abdallah Al-Ansary, Language and development trainer

 So, take that first step and start your investment journey HERE.

5 Keys to Improve Your Financial Health

5 Keys to Improve Your Financial Health

If the current state of the world caused you to re-evaluate your financial health and urge you to take your money seriously, this blog is for you.

Getting your finances in order is more important now than ever.
It doesn’t matter where you’re now.

I will share with you today 5 fundamentals to improve your financial health no matter how much or how little money you have.

Let’s go over them,

1- Determine Where You Are Financially

 In a dialogue in “Alice in Wonderland”:

Alice: would you tell me please which way I ought to go from here

Cat: that depends a good deal on where you want to go to

Alice: I don’t much care where.

Cat: then it does not matter which way you go

What a piece of advice about clarity.

First thing first, you have to have clarity,

You need to be clear about where you are now, in order to know where you want to be.

Many people think that to achieve something in their life they have to set goal, this is correct, but in order to reach your goal you have to know where are you now, so in our case, you need to know where are you standing financially. Most people do not know.

Simply, understand your income, what you own, what you owe, what are your assets, and what are your liabilities,  the difference is your net worth.

 2- Make a Budget

Money doesn’t just drift into your savings account, and debt doesn’t get paid off on its own.

You have to be purposeful and have a plan.

You have to tell your money where to go.

You need to make a budget,

if you’re serious about wanting to take control of your money instead of having money take control of you, then you have to learn to live within a budget.

And despite what you may have been told,

a budget doesn’t limit your freedom, it gives you freedom!

If you want to seriously improve your financial health,

Make a list of your sources of income.

Income: List your monthly income, salary,

Expenses: Record your expenses using information from your spending tracker.

Do the calculation and compare your income to your expenses.

  1. If you have more income than expenses, now it is time to start saving or increase the amount you are saving.
  2. If you have more expense than income, carefully review your expenses.
  3. Make adjustment when you can, especially in the wants area of your expenses.
  4. At minimum, get your expenses in line with your income and if possible, start saving.

 

3- Spend Less than You Earn

There will always be temptations coming at you from every direction along the way.

Everybody wants a piece of your paycheck, am I right?

But you get to dig in your heels and say, “Nope. I choose to live wisely and within my means.”

This is the time when you really need to think through and identify your needs and wants.

A true need is something you must have for survival such as:

Food, electricity, Gaz, water, clothes, shelter.

A Want is something that is not essential to survival, but you would like to have such as:

Designer clothing, cosmetics, and brand shoes and bags

The confusion can arise when we are not sure if something is a need or want.

We live in world where pressure to spend money is constant.

We are surrounded by ads all the time.

They have one objective, to get your money.

So that’s why it worth paying attention to the difference. Nothing wrong to buy some wants but you have to save first.

4- Plan For Your Future

Nothing will make you feel more financially healthy than a stockpile of cash sitting in the bank, waiting for a rainy day.

It’s called your emergency fund, and it’s your safety net when emergencies happen.

Too many people reach for their credit card when their car breaks down, but all that does is turn a car problem into a money problem.

When you have money in the bank just for emergencies, you can simply get the car fixed. No stress. No drama.

And your financial health won’t take the hit, your emergency fund is there to protect it.

It can be difficult at times to build this up, but if you make it a priority, it will happen, and then you’ll have so much peace of mind!

And once you’ve got that, invest 15% of your income into retirement.

5- Adopt The Giving Mentality

This is a very important concept you have to understand from an early age.

There is a universal law, the more you give the more you receive.

There are always people less off than you, and you can help them.

It is an indication that you feel abundant about your money, and you are ready to receive more.

This is something you should not skip.

Even if you are still on a very low income, you can put aside 2.5% for giving.

Doing this reinforces the belief that you have plenty of money to go around.

The act of giving changes your relationship with money and with the people around you.

Living generously with an open hand keeps money in the proper perspective for you, and it blesses everyone involved.

Generosity is a sign of someone who is truly financially healthy.

You Don’t Need to Be Rich to Invest Successfully

You Don’t Need to Be Rich to Invest Successfully

 Everyone can invest. And everyone should.

It doesn’t matter if you’re old, young, rich, or not.

This is what I believe.

The real key is to get your money working for you… even if it’s not much.

A lot of people think about investing but they never get around to it.

Study after study shows that investing is the best way to build wealth and reach big financial goals.

The sooner you get started, the better returns you’ll see.

Not convinced? Consider the growth potential…

Consider that if you get a 10% return (about what the market has averaged over its history) your money will double every seven years.

$1,000 becomes $2,000 then $4,000, then $8,000.
That’s just a single investment over 21 years – an 8x growth of your money!

If you get started now and put money in each month think just how much you’ll have available for your retirement.

In order to be financially secured, you will want to invest your money.

Investing allows you to put your money in vehicles that have the potential to earn strong rates of return.

Investing your money can allow you to grow it.

Most investment vehicles, such as stocks, certificates of deposit, or bonds, offer returns on your money over the long term.

This return allows your money to build, creating wealth over time.

If you don’t invest, you are missing out on opportunities to increase your financial worth.

If you are ready to take the first step in your investing journey , enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.

This course is for you if you:

You want to start investing in the stock market and you don’t know how.

You are scared of investing because you have heard many stories of people losing their money due to investing in the stock market.

You are confused with all the alternatives and bombarded by information, stocks, bonds, gold, cryptocurrencies.

Or, may be you are investing now or invested before but you are not getting the results you want.

I Want to Invest, Where Should I Start

I Want to Invest, Where Should I Start

Whether you’re saving for retirement or seeking wealth through the magic of compound growth, the “secret” is really just a simple three-step plan:

  1. Earn a decent living and live beneath your means.
  2. Invest that difference automatically, and increase the investment with each year.
  3. Invest in low-cost (0.20% per year or less), passively managed, widely diversified (across stocks and bonds and across domestic and international) index funds that are appropriately balanced for your age.

Which funds should you pick?

My advice is super-low-cost, passively-managed, widely-diversified index funds.

Super-low-cost: means that the OER (Operating Expense Ratio) charged by the brokerage is no more than 20 cents, per $100 invested, per year or 0.20%.

Passively-managed: means that there isn’t a human or team of humans who run the fund trying to “beat the market”.

Widely-diversified: means the fund includes lots of stocks and/or bonds so that you’re not exposed to one particular company.

There’s no need for you to gamble; you’re going to pile up a lot of money playing it safe.

Index funds: try to match well-known stock indexes like the S&P 500 or the MSCI International index.

The managers of these funds don’t try to pick the best stocks; they just try to match these publicly-known indexes as closely as they can.

For the most part, they’re just buying shares in the appropriate amounts; that’s why they can charge so little to their investors.

If you don’t want to pick and choose index funds yourself,

there’s good news,

you can just take your birth-year and add 60 then go to vanguard.com and invest in the Vanguard Target Retirement fund that’s closest to the year you calculated.

That fund invests in stock index funds and bond index funds, both US and International, in such a way that will be aggressive when you’re young and more conservative as you age, which is exactly what you want to do with a long-term investment, and it’ll happen automatically, without you having to keep track of it.

Finally, do it automatically. Figure out where you want your money to go and how you want it invested, then have the money taken out of your paycheck before you ever see it.

This is a strategy that will put you on the path to financial success.

To be honest, if you’re 25 years old now, you’d likely be ticking off your million before you’re 50.

Of course, there are no guarantees in the world, but based on the history of the world economy, you’d be as likely to do better as to do worse.

Why Saving is Riskier Than You Think

Why Saving is Riskier Than You Think

My mom used to always tell me:

“Saving your money is the wisest investment.”

I am confident that your mom too.

it sounds like good advice.

But saving can never lead to wealth if the saved money is never put to hard work by having it invested in income-producing assets that generate income and build wealth.

Saving isn’t the key.

But INVESTING is.

It is a numbers game.

Today I will explain why saving is riskier than you think.

Let’s see these two scenarios:

SAVING WITHOUT INVESTING: 

Saving 100% no spending

Suppose you earn an average income of 2000$ a month (24,000$ per year).

You start working at 25 years.

You work hard for 40 years

Of course you cannot save the whole earning, you have to spend on renting, buying food, insurance, utilities.

Can you be a millionaire?

NEVER, with an average income of 2000$ you will never be a millionaire if you do not invest.

SAVING WITH INVESTING:

Save 300$ a month to INVEST

You earn average income of 2000$ a month (24,000$ per year)

You start at age 25 year.

You invest 10% of your income a month (300$ or 3600$ per year)

Invest this small amount in 40 years, expected return:

$1,678,382$

With 10% return in stock market for example your investment will be accumulated to $1.6m.

AWESOME.

You possibly can be automatic millionaire by doing nothing.

HOW CAN SMALL INVESTMENT OF $300 A MONTH TURN TO $1.6m?

Here are examples:

A $10,000 investment in Home Depot in 1990 would now be worth $1,630,800.

A $10,000 investment in Apple in 1990 would now be worth $2,988,700.

A $10,000 investment in Microsoft in 1990 would now be worth $3,299,300.

The largest financial rewards are held for long-term investor.
Start investing … Stay Invested 

If you are ready to take the first step in your investing journey , enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.

How Can you Invest in Exchange Traded Funds

How Can you Invest in Exchange Traded Funds

Do you know you can own pieces of companies such as Amazon, Apple, or Microsoft with limited risk?

It’s pretty easy actually.

An ETF is known as an exchange traded fund.

These funds own a collection of securities.

ETFs trade in the same way regular stock would.

Advantages of ETFs?

– Lower fees
– Diversification
– Trades similar to stock

This doesn’t mean they don’t there aren’t any disadvantages..

Some of the disadvantages include

– Lower dividend yield.
– Less Diversification (some ETFs focus on individual sectors).
– Some ETFs are taxed higher than others (ETF that holds precious metals).
Overall the pros outweigh the cons.

Let’s go over few well known ETFs:

$QQQ ETF

This is an absolute POWERHOUSE

– It’s up 22.02% YTD
– Its up 80.02% in 3 years
– It’s up 133.5% in 5 years

It’s top 3 holdings are:

– Apple 12.17%
– Microsoft 11.25%
– Amazon 10.88%

Next, “my favorite” Vanguard S&P 500 ETF $VOO

You can’t go wrong with this one.

It’s not as tech focused as $QQQ is though.

Over the last 5 years this ETF is up 55.01%

It’s top 3 holdings are:

– Microsoft 5.99%
– Apple 5.77%
– Amazon 4.49%

VOO was $104 at close of Feb 2010.

VOO close at $255 in April 2020.

And in July 2021 close at $400

Calculation:
400-104/104=284%

Looking for a dividend ETF?

Vanguard’s High Dividend Yield ETF $VYM.

They pay a 3.75% yield.

Don’t expect very high returns in the beginning.

Always remember: “No such thing called Quick Rich Scheme”

Investing about being patient.

Over the last 10 years this ETF is up 115.82%

It’s top 3 holdings are:

– Johnson & Johnson 3.86%
– Proctor & Gamble 3.03%
– JPMorgan 2.97%

Wondering how you can start investing in ETF?

I prepare a FREE guide for you, Click Here to Download.

And if you are ready to take the first step, enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.

If Investing is Easy, Why Does Not Everyone Do it?

If Investing is Easy, Why Does Not Everyone Do it?

Because it isn’t easy and simple at the same time.

Buffett says it perfectly here: Investing is simple but not easy.

The comparisons I would make to other domains is:

Losing weight is simple but not emotionally easy,

Saying not to others is simple but not emotionally easy

Doing the difficult things in business, every day, is simple but not easy.

Likewise, investing is simple, but certainly not easy on people’s EMOTIONS.

Look at The Nasdaq for example, it has been the best performing major stock market in the last 25–30 years.

12%-13% average yearly returns has been seen since the mid 1990s.

And yet the Nasdaq went down about 75% after 2000, 50% in 2009 and about 40% this year, before the recoveries.

The S&P500, Dow Jones and some other markets haven’t been quite as volatile,  but have still given long-term investors excellent returns with a lot of volatility along the way.

So the basic tenants of investing are simple:

  1. Buy and hold for decades – or buy, hold and rebalance.
  2. Have an allocation to bonds that increase as you age.
  3. Be diversified but not overly so.
  4. Never panic or get too excited.
  5. Reinvest dividends.
  6. Be excited and take advantage of markets falls but don’t wait in cash in the meantime (market timing).

All very simple, but emotionally difficult.

So many people panicked in March 2020 and 2008 for this reason.

It isn’t easy to stay calm when the media, your friendship group and everybody else is shouting “this time is different.”

People thought that in 1941 when Hitler was moving through Europe, or during the Cuban Missile Crisis.

They certainly felt that way in 2008, when hardly anybody thought markets would recover in barley 3 years.

All these things are easy to understand, but hard to implement in practice, for many.

Control Emotions: One of the hardest skills can an investor master.

It needs time, effort and experience.

If you are ready to take the first step in your investing journey , enroll in my course “Investing For Beginners: How To Invest With Confidence”  HERE.