3 ways I changed my STOCK MARKET INVESTING STYLE in 2018
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I Have my stock market investing style here in 2018, I have made some very big changes this year and every single year, I think it’s always important to tweak a couple of things here, tweak a couple of things there and get better and better in whatever you’re doing in life.
Especially stock market investing, there are always improvements we can make out there. There’s no such thing as the perfect investor, the perfect anything, okay, it’s always about getting better. 2018 has been a year.
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I have massively changed three very core things to my investing philosophy, okay, now some of the things have stayed the same, okay, looking at companies for the long term, the next three to five years, valuing balance sheets, looking at the company from a lot of different ways, looking at risk factors.
All those type of things have not changed, okay. But there are three things that have changed in a big way with me as a personal stock market investor here in 2018, I think this is something that will benefit me for decades to come.
These three big changes, I think it’s always important to listen to, you know, other people’s mistakes that I have made, or anybody has made out there and kind of realize, okay, they made some mistakes there, maybe I can.
I can avoid those mistake by by figuring out something that they have figured out, guys, so I hope you really enjoy this state. Let’s just get right into this guys. So the first thing, the first big mistake.
And the first big thing I should say I’ve changed is I would go super heavy into two or three stocks, okay? So imagine you have, you know, 100% of your portfolio in cash, all right. And so what I would go ahead and do is with that 100% of my portfolio in cash.
Then I would go ahead and put that in that money, let’s say 55% in my favorite stock, okay, stock a, and then stock the might end up getting, you know, 35% or something like that. So now we’re in 90% of the portfolio is just in two stocks alone, okay, 90% of portfolios in two stocks.
And then if I had another stock, I put like 10%, in that maybe I put 5% of that. And then 5% in a for stock. But needless to say, I got away with this for a long time where I would just go super, super heavy into two stocks.
And you look like a genius when it when it continues to work out. But the problem is, you’re always going to end up having a big investment of yours go bad, it happens to every big and it happens to every investor out there ever in history, okay, every investor ever in history has always had stocked mess up for them.
Okay, and sometimes very, very large investments. All right. So with that being told you you don’t want to ever put too many eggs in one basket, because guess what, eventually one of those baskets is going to be bad.
If you’re in this game for decades and decades, eventually, you’re gonna just pick a bad one, okay? It’s just gonna happen to everybody. Okay, it happens to everybody. Realizing that if you have if your bad one.
You got 50 55% of your money 50% of your money 60% of your money in that one stock in it loses let’s say 50% of its value, your portfolio’s just decimated in a massive, massive way, because you just took a massive loss on that.
Okay, rather than if you were more diversified. So now I take a much more diversified stance on things okay. So in my portfolios, now, I’ll have a stock a I’ll have a stock B, A, C, A, D, and E and F A G, I mean I have now I have in pretty much every single portfolio at least seven plus stocks.
Okay, so my portfolio I think I just showed a portfolio off recently on the here on the YouTube channel and I think that one has nine stocks in it. Okay. So basically what I will do is I will not go any heavier than about 25% of my portfolio into my biggest investment Okay.
That’s about the maximum level however, I don’t even really like being up there anymore. I like to stay maybe around 20% or somewhere around there as far as my stock a Okay, and then this one, maybe 15% and then maybe 10% 10% and kind of going down from there okay.
Meaning you’ve got a more diversified portfolio cuz think about it guys you own two or three stocks you’ve got everything in those two or three stocks and especially if you’ve got a lot of money right you’re putting just a huge risk on it.
Because you’re not diversified you got so much so many, you know, shares all in one or two stocks it literally doesn’t make sense it’s just a bad bad thing. Like I said when it’s going good and you’re picking really good stocks.
It looks like you’re a genius you’re like oh I just stuffed all this money in this one stock but when that one comes around it will happen to everyone out there I hate that I hate to say that too but uh you know, but it’s just the truth it’s going to happen to everybody many times in your investing career throughout the you know, decades.
If you actually plan on being in this game for a long long time. It will happen to everybody Warren Buffett I don’t care who you are don’t go this route guys go more diversified route it’s a much safer option for you rather than they’re always they’re always a lot of stocks that are good deals.
That when I look at the stock market, there are at least five stocks right now. I would love to buy Okay, at least five stocks probably you know 10 maybe 15 stocks out there Okay, there are 1000s of stocks.
If you cannot find a good value anywhere you just got to look some more Okay, however if you think every single stocks a good value that’s taken too far, okay. So So pick and choose your battles but make sure you’re staying diversified guys.
I was just something I got away with for a long time. It came back to bite me and I realized in 2018 diversify up a bear. This is crazy. All right. The next one has to do with management management was something I always looked at.
But I always viewed the management team, meaning the executives, specifically really the CEO of the company. I always kind of put that on a backburner. Okay, if there was a management team I didn’t like if I didn’t really, you know, feel them if the gym just wasn’t a good vibe there.
I’m like, bypass it. And I might just say, well look at what the PE is at right now. We’ll look at what the income statement Look what the profits are. I will put the management team on really like a backburner. All right, the back the back burner back there.
All right. This is something I value a lot more now. Okay? If there’s a management team, I don’t like if I don’t see them just really having a long term vision. If I don’t see them, them taking the care to that business, they really should.
You know what, I go ahead and say I say that stocks, not for me, okay, I don’t care what the P is, I don’t care if it’s an EP, I don’t care if they make tons of profits, I don’t care for their balance sheet happens to be really good.
If it’s a CEO and management team there. And I listen, these conference calls and I’m like, I’m not really feeling these guys. I don’t think they have the focus there. If it’s not a management team, I like I’m not investing in, I will not invest in it.
Or if it happens to be a management team I’d bought into, and then things start to change and it’s things just get worse, I’ll sell out of that stock. Regardless, if I’m up or down the stock is gotten that important to me.
Because what I’ve learned is a management team can come to burn you worse than ever, okay, a bad management team can literally sink your investment for you, they can literally sink it, alright, a great management team can take that stock up, you know, hundreds of percent over the years, bad management team can decimate a company.
I’ve seen it time and time again, guys, we’re a great company or good company was just get decimated by a management team. Or, you know, you might put too much of too, too much. You know, I guess emphasis in the CEO in in so much hope that they can turn things around with that company.
And then it doesn’t happen. And it’s just a bad thing, guys. So management, I value this so much more than I ever have in the past. And the last thing is multiple growth vectors. What do I mean by this, this is a very, very important thing.
I think everybody should really open up your ears this one because it’s something I really realized, when I look at the stocks that have really outperformed the market in a dramatic way outperform the German market.
And dramatic way since I started investing, when I come to see is a lot of stocks that have what I call multiple growth vectors for that business. Okay. So imagine you have a business, you know, and it just does one thing of here.
It’s a one trick pony, it really has one lane that stays and, and that’s good sometimes because it has one one main focus. But what I have found the companies that really succeed in a massive way, are ones that have this thing working for them.
But can also focus on this thing over here and have this succeed without this dropping off. And then they start another growth vector in that succeeds. All right, these type of businesses are where you can get massive gains from the multiple growth vectors one.
So when I look at businesses now, when I’m looking at doing my research into businesses, this is something I’m valuing more and more going forward. So now, you know, when I think about stocks, a Facebook .
I think about they have multiple growth vectors for that company, when I think about something like Alibaba, like I’ve been buying into many, many growth vectors for that company. All right, doesn’t mean I’ll just invest in companies that have multiple growth vectors.
But when I start to look out more and more into the space, I look at a company like Intuit and what they’ve done over the years, they have multiple growth vectors going from a company like that, not only can you can produce a lot more revenue and profits down the road, as long as they can execute.
But on top of that, they have the story, which is a story is so important in the stock market, the story management tells to investors, fund managers, hedge fund managers, mutual fund managers, that gets people excited, because they say, well, it’s got that growth vector over there.
And then it’s got this thing over here. It’s got because it’s really easy to just poke at a company. Like let’s say, for instance, a company I own that has only one growth factor is Toll Brothers, okay? Toll Brothers is a really easy stock for short sellers or anybody to poke at and say, if housing gets weak, they’re screwed.
Okay? Really easy. However, on the flip side, something like an Alibaba or Facebook, you could point this thing you could say, well, Facebook’s getting weak the fees, I’m talking about Facebook, the platform, right? But then yeah, the Long’s can say, well, oh, we also have Instagram over here.
We also have WhatsApp, which isn’t really even monetized yet. We also have messenger, which is going to be a massive growth engine force. We have all these other things over here, Oculus, we have all this cash that we can buy other companies within the future.
There’s multiple growth vectors. So it tells the story, guys, it’s so important. It’s so important. So this is something I’m valuing more and more as, as I invest in the stock market is looking at these companies with multiple growth factors and viewing them as a no in understanding I’ll have to pay a steeper piece sometimes for these companies.
And that’s okay, in the end, that’s okay. I’ll pay up for some of these companies that have many different growth factors. Because they got the story, and it’s going to help them produce a lot more profits and revenue in the future.
But the trick is you got to make sure they’re executing. Okay, so there are some companies that are like, Oh yeah, we’re gonna do this and that and they don’t execute on anything. There are certain companies that can execute on a lot of different things.
And those are the special companies. I hope you guys really enjoyed this today. These are three massive changes I’ve made this year with my stock market investing style. Let me know what you think down there in that comment section.
I hope you guys learn from this. I hope this was a very very valuable content for you guys. Hit a thumbs up if you enjoyed this day. Make sure you follow me on Instagram if you love stock market news. Thank you for watching. Have a great day.