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Lucas
@theLucasWalters
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#DYOR DO YOUR OWN RESEARCH! 🧐 Okay…but what does that mean? We live in a world where “research” has pretty much lost its meaning. To a large number of people, “research” is watching a YouTube video or scrolling a Reddit forum. But that’s not what it means. I’m a nerd, so I like knowing the definitions of the words I use. Why don’t we define research real quick? According to the Merriam-Webster dictionary, research has 3 different definitions: 1. Studious inquiry or examination. 2. The collecting of information about a particular subject. 3. Careful or diligent search. I love those last 2, so I’ll combine them into my own definition that I’ll be using thought this post: “Careful or diligent collection of information about a particular subject.” And studious is a synonym of careful, so the first one fits in too! Now using the definition we’ve established, watching a YouTube video or reading a Reddit forum are an important part of researching something, but not all of it. When it comes to stocks especially, content made by people with no connection to the company you’re researching should be taken largely as opinion. A video on YouTube, article from CNBC, or even a post on Public. Everyone is subject to bias, so don’t take their word for fact as they might have an agenda. The BEST source of information is the company itself. Every public company is required by law to publish investor updates. You often can’t find them through a brokerage like Public, so you have to go to the company’s website and look for an “Investor Relations” page. Take $IBM for example. Earlier, I was looking into IBM’s finances. To find their investor page, you can go to https://www.ibm.com/investor There, you’ll find SEC reports like 10Qs (quarterly reports), 10Ks (annual reports), proxy statements, etc. If you’re researching IBM’s business because you want to buy the stock, that should be the first place you visit. But now you’re hit in the face with a bunch of numbers you might not understand. That’s perfectly understandable; there’s a good reason accountants have to go to school for years to be good at their jobs. Finance is HARD. But there are some things you can do to help you understand better. For one, just keep at it. Keep looking at and reading reports and reading articles at the same time to make sense of what’s going on. The more you do that, the more they’ll make sense. Something else you can do is when you come across a metric you don’t understand, just Google it! These reports often follow a standard template, so the metrics from one to another will be similar. Investopedia.com is a great website for defining metrics you don’t know yet. Another great thing is my personal favorite tool for investing strategy: The Intelligent Investor by Ben Graham. It’s a book originally written by Warren Buffett’s mentor. He’s often regarded as the father of value investing. That book has shaped my investing methods more than anything else. If you want to check it out: https://a.co/d/0VnVhe2 (Amazon link; not an affiliate link or anything, I just love the book) Moving on, now that you understand what you’re reading in financial statements, how do you decide when to pull the trigger on an investment? The most important thing is to set up some rules. I’ve never written my rules down, but these are kinda what I go by generally: 1. Has to be profitable (with a few rare exceptions). 2. If profitable, must be able to remain profitable for the foreseeable future. If not profitable, must be able to achieve profitability within the foreseeable future. 3. Price-to-earning ratio (P/E) must be 30 or less. 4. A dividend is preferred, but not required. 5. Cannot be a meme stock. Figure out your own rules for making a buy and then try to stick to them as best you can. Don’t get over-excited in a bull market or over-depressed in a bear market. Remember: the companies haven’t changed, only market sentiment. Once you have all of these elements, that’s what research is. You haven’t done research if you’ve seen a post online saying $MULN is going to the moon. You’ve *started*. Do the rest on your own from there. Then, make an intelligent decision! I truly think anyone can be an investor. It’s not easy, but it’s not too hard either. But hopefully now, you can go forth and research! Image credit: https://www.safalniveshak.com
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