A Skeptic's Guide to Stock Investing

A More Realistic Approach

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• Portfolio 12 just hit its one year mark!

  • It’s up 50%, I’ll take it.

  • 2 years to go, and still lots of upside left, in my opinion.

• Portfolio 13 has performed even better to-date, annualized (Knock on wood).

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A Skeptic's Guide to Stock Investing

We live in a world where everyone has an opinion about the stock market. From Reddit traders claiming to have cracked the code, to Wall Street analysts making bold predictions, it's enough to make any rational person skeptical. But you know what? That skepticism is healthy.

I remember my first reaction to stock picking: watching CNBC analysts confidently declare their "top picks," only to see those same stocks tank months later. There was no accountability. Something felt off about the whole thing.

A More Realistic Approach

After years of watching both institutional and retail investors, I've noticed that the loudest voices in the room often have the worst track records. The real success stories usually come from investors who approach the market with healthy skepticism and a systematic approach. The good news is, there is no “one right way” to invest. One must find their own way.

The Skeptic's Framework for Stock Investing

So, what does intelligent stock investing look like when we strip away the hype and speculation?

Here's what I've learned:

1. Start with Index Funds as Your Foundation:

   • If you’re just starting out, before buying individual stocks, build a core portfolio of low-cost index funds. Think of this as your safety net, while you learn. The historical data is clear: the S&P 500 has returned about 7-10% annually over the long term.

   • This also gives you a benchmark for evaluating individual stock investments.

2. Understand What You're Actually Buying:

   • Don't just buy stocks – buy businesses.

   • For example, instead of asking whether Apple's stock will go up next quarter, ask whether you understand and believe in Apple's business model, competitive advantages, and growth prospects.

3. Embrace Uncertainty:

   • The market hates uncertainty, but successful investors learn to work with it, even take advantage of it.

   • Instead of seeking certainty (which doesn't exist), focus on probability.

4. Use Data, Not Just Stories: Data Informs

   • Understand Competitive Advantages (what Warren Buffett calls "moats")

   • Observe industry trends and market position

   • Study Management's track record and wisdom

   • Review Financial Statements

5. Start Small and Scale Gradually:

   • There's no rush. Begin with a small investment in a company you understand well. Monitor how it performs, not just in terms of stock price, but in terms of business performance. Use this as a learning experience.

   • Give yourself your investment decisions at least 3 years before judging their efficacy.

   • Work on your Imposter Syndrome

The Reality Check

Let's be clear about something: individual stock picking isn't for everyone, and that's perfectly fine. Index funds have democratized investing and have provided excellent returns for most people.

But if you're going to invest in individual stocks, here are some hard truths:

• You will make mistakes. Believe me, I have.

• Even the best investors have a success rate of about ~60%.

• Some years will be terrible.

• Proper stock analysis takes hours, not minutes.

• Have the right expectations: Let’s not forget that the magic of compounding takes a long time to experience.

Creating Your Investment System

The key to successful stock investing isn't about finding "hot tips" or timing the market. It's about creating a systematic approach that:

• Aligns with your skeptical nature

• Focuses on business fundamentals rather than market noise

• Includes clear reasoning for buying and selling

• Manages risk through position sizing and diversification

• Documents your investment thesis for each investment

The Path Forward

Remember this: skepticism in investing isn't a weakness – it's a strength.

The most successful investors I know maintain a healthy skepticism while following a disciplined approach to analysis and decision-making.

Your journey into stock investing should be methodical, but personal.

Don't let anyone rush you into decisions. Take time to build your knowledge, start small, and learn from each investment. The market will always be there tomorrow.

As a skeptic myself, I've found that the best investment decisions come not from conquering doubt, but from channeling it productively into analysis and risk management.

As Peter Lynch would say, "Know what you own, and know why you own it."

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Whenever You’re Ready:

• It’s been wonderful speaking to some of my readers, from total beginners, to others who professionally manage significant sums, and everywhere in between.

• I find that Zoom is a great informal way to connect. If you have a passion for investing, I’d love to meet, connect, and potentially collaborate. I hope you do too!