Wednesday, June 20th, 2018

Financial Freedom: Do You Know How to Research Your Investments?


In 1943, Warren Buffet, aged 13, worked as a newspaper delivery boy and in his grandfather’s grocery store.  He knew his Core Desire early – make money – and enrolled at the Columbia Business school in order to learn from securities analysts David Dodd and Benjamin Graham.  He graduated with an M.S. in Economics in 1951.

Financial Freedom: Do You Know How to Research Your Investments?

Financial Freedom: Do You Know How to Research Your Investments?

Young Warran went on to work as an investment sales man, a securities agent, and then a partner in various firms.  In 1962, he became a millionaire.  In 2008, Forbes declared him the richest man in the world – dethroning Bill Gates for the first time in 13 years.

What does this have to do with you?

Two things.  First, Warren Buffet is another example of a kid without great prospects who made good.  If you’re doubting whether it’s possible, look again.

Second, Mr. Buffett teaches us to invest ourselves into our Circle of Competence.  Put your time, money and effort into arenas where you have knowledge.  In other words, if you’ve never bought a personal residence, never owned land, and have no experience with property management, you shouldn’t pick up a 400 unit apartment complex in foreclosure, no matter how good the price looks.

How do you create and bolster your Circle of Competence?  By sound research – due diligence.  Get good information from good sources, and act on it, and you will attain financial freedom.

Here are some guidelines to get you started:

  • If you have a conversation with a friend or family member about your potential investment and you feel uncomfortable or defensive with their questions, you should probably do more research.
  • Know the credentials of your source. Advice doesn’t mean a thing if it’s self-serving. Every time a stockbroker buys or sells for you, she makes money, whether or not it’s a sound financial move. The seller of the franchise you’re considering has his own agenda – his pocket book. Online advisors may be more interested in selling their services than giving the best advice. As Mr. Buffett said, “Never ask a barber if you need a haircut.”
  • Be very leery of “hot tips.” Intensive research may sound daunting, but the hot tip short cut is rarely profitable.
  • Don’t allow yourself to paint a fantasy by slanting your research so the risk is minimized and the benefit is maximized. It’s fun to imagine the day when the money starts coming in, but to make that day a reality, you need to be clinical in your assessments.
  • This is no time to think positive. Look for the bad things – the hidden risks, instability factors, and unanswered questions that can turn an attractive investment opportunity ugly in a hurry.

I’ve said many times that making money is fun, and that just about anyone can do it!  You might have thought, “Sure, Jack, sure.  Then why isn’t everyone doing it?”  One of the reasons is right here.  Research is a challenge for a lot of people.  It requires patience and self-discipline to take that long look before you leap.  But  as I go on in these coming blogs to talk about the pros and cons of particular investments, please remember:  not one will succeed – not one­ – if you aren’t willing to prepare.

You need a mentor to help you avoid the mistakes I’ve made, and enjoy the success I enjoy.  Success in 5 Minutes a Day will lead you to the financial freedom that you’ve never thought possible.  Join the affordable program Success in 5 Minutes a Day and learn how you can put leveraging to use.

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