Tags

, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,


First of all, I’ve gotten quite a bit of feedback since I started writing the blog again. Due to the feedback received I will be writing about Virtual Reality Stocks, Under Armour and Michael Kors, and expediting the Investing for Beginners series. This article was going to be apart of one MASSIVE Investing for Beginners article, but I’ve decided to make it a series. I will be adding to these as I go, and then at the end of the series, I will be compiling all the articles into one big, edited, article.

I know I’ve gotten behind on the 30 articles in 30 days, but I’m really trying to get back on track with these articles, and with school work, so it’s been a bit of a grind.

I know that this article is totally out of place in the series and should be like the 3rd or 4th article in the series, but honestly, I’m not really feeling like explaining the primitive basics of how the stock market works right now (midnight), so enjoy this article.


As I’ve said before, I’m more of a, “Use your heart not your head” type of investor. That philosophy takes on different styles of investing every time, but for this article I will be sticking to one specific style.

The stock market isn’t something that you have to study for years and have a natural talent for, it’s just like a game – play it long enough and you’ll learn everything about it, and become extremely skilled at it.

All you do is look for stuff you use in your everyday life. Then you ask yourself a couple questions, and then you decide whether or not you want to buy the stock by asking yourself a few more questions. It might seem really dumbed down and simple, but that’s because it is.

This is one of the easiest ways to find a stock that you know you will not lose money in (as long as you don’t invest in Financials like banks, or Healthcare stocks, you should be fine). Why? Because these companies are NECESSARY for the world to go on. Chances are, if you use something, and your friends use something, then the majority of everybody uses it.

This is how  found stocks like Netflix, Tesla (although it wasn’t necessary or mandatory at the time when I found the stock in 2012), Amazon, Adobe, Microsoft, Apple, Google, FaceBook, Visa, Nike, Under Armour, Activision, Electronic Arts, and a lot, lot more.

If you’re reading this and going, wait, all this kid did was spit out FAANG (Jim Cramer’s acronym for the super successful tech stocks that are holding the Nasdaq up), and a few other stocks that are super obvious, well you’re right. Except, I found every stock in FAANG 3 years before Cramer (Netflix being the last of the stocks that I identified in 2012). How? Well I just asked myself these questions:

  • What do I use everyday?
  • Do other people use it everyday?
  • Can the world function without it?
  • Will people feel a void if it doesn’t exist?
  • Do all my friends and family use it or want it?
  • Will it impact them if it disappears?
    • If yes to all the questions above, proceed to find the items creator and check if they have a stock.
    • If they have a stock, ask yourself these questions:
      • Have the recently announced earnings?
      • Have they shot up a lot recently(50% or more in the last quarter is how I define it, you’ll come up with your own definition as you learn)?
      • Are they expected to do poorly in earnings?
    • If the answer to any of the above is yes then I don’t recommend buying the stock. The only times I’ve broken these rules and still made money is with Netflix every January when they report earnings and have over inflated comps which analysts never expect and the stock shoots up (check out my post from Jan. 2014 when the stock went up 86% the week I recommended buying it), and with every other stock in FAANG, as well as a few other trades. However, seeing that this is [Investing 101], I’m going to assume that you don’t have enough experience to make that kind of call yet.

Now that you’ve asked yourself all these questions, I recommend blindly going to your brokerage of choice and putting in an order to take a ~5% or less stake in the company.

When I was 11 (I think this may have been before I turned 11), in 2011, I made a list of 3 companies the world couldn’t go on without. The list was:

  • Adobe
  • Microsoft
  • Google

Are you surprised to see Microsoft and Adobe on that list? Well now I’d probably replace Microsoft with FaceBook, and keep the rest of the list the same. Either ways MSFT has done spectacularly in the last 5 years, as has ADBE, and GOOG/GOOGL. Amazon (AMZN) was a strong contended for the Microsoft slot until Jet.com came out. Now you have Ali-Baba spin offs, and Jet.com to cover just about all of your online shopping needs. While no one under 35 uses FaceBook anymore for purely social media purposes, it’s used by just about every business, hosts a plethora of games, and is leading the way in virtual reality development (and in about 50 [sic] other fields as well).

Anyways, the reasoning behind Adobe was that everyone used PDFs. Gamers everywhere used Flash, and Youtube is based on Adobe Flash. Imagine if Adobe went under, the few months (at least weeks), you’d be without Youtube would be devastating for people everywhere.

The reasoning behind Google was (and still is) that it is used by everyone, for just about everything on the internet. Teachers say, “Google it,” not, “Bing it,” or, “Yahoo it,” (Yahoo, right that still exists), entire businesses are built off of Youtube, manipulating Google Search Engine Results, Google Blogs, AdSense, Scholar, Wallet, Play, Android, literally everything that is anything, Google was involved somewhere along the way.

Now if you’re in a betting mood, you can take a chance on companies that have fallen on hard times. I recommended a company called Aeropostale on Quora a few weeks ago. ARO had fallen from $30 to $0.20 cents. I figured that I saw enough Aeropostale shirts floating around school that it was still relevant, and that it couldn’t possibly just go under like that (and even if it did, oh no, you just lost $0.20 a share). I went to school and asked 10 girls when the last time they wore Aeropostale was.

I was surprised by the number of people who’d worn it within the last week (7), so I figured YOLO, lets go for it. On April 4, the stock rallied to above 50%.

I’d give some more anecdotal evidence about why these simple questions are so good at getting the job done, but you won’t believe it until you see it for yourself. Go ahead, track a stock for a couple weeks (or months), that you picked using this method and report back with the results.

I don’t recommend using this for banks, healthcare stocks, or social media stocks because they are so fragile and move due to far too many other reasons. Social Media stocks are incredibly hard to make money off of because most social networks don’t have proper advertising and revenue structures in place.

I try to respond to every email I get, but there are an awful lot of them, and only one of me, so give me a few days and I’ll get around to you. I hope this article was helpful in some way, and if it was, please rate it and leave a comment.

I’d write some more, but it’s almost 2 am here, and even if I did go to bed at 9pm last night, I’m feeling tired, so good night, and hope this helped!

 

Advertisements