The success of value stock investing lies in adopting the right habits
In value stock investing, of course you need to choose which stocks to buy, but even more important isthe habits that include daily life.
In value stock investing, you hardly ever trade. Buy good companies at good times and hold them as long as they are good—that is the most reliable rule for success.
That doesn’t mean you should do nothing, though. In fact, there are many things you should do in places you can’t see. For example, the following:
- Create starting capital
- Find good companies
- Buy when they go down
All of these relate to everyday habits.
Create starting capital
Creating starting capital isthe most understated but most necessary thing. Without initial funds, nothing can begin.
The reason I say “habits are important” is exactly here. For salaried workers, income is limited, soyou must cut expenses to save starting capital. You need to curb wasteful spending and aim for income minus expenses to be positive.
In reality, most people give up at this point. If you’re living somewhat casually, your income and expenses can drift toward balance without you noticing—it's human nature.
The biggest driver of increased spending is “showing off”. People want to look good to others, so they buy impressive city-center apartments and expensive cars to flaunt their success, even if unnecessary.
Of course, occasional indulgence is needed. The problem is when it becomes a bad habit.
If you buy a tower apartment in the city, you’ll attract neighbors with similar incomes. If someone in the same building owns a foreign car, you’ll feel compelled to buy one too. If you have a child, private schools and prestigious tutoring become the norm.
As this continues, a large portion of your income disappears into consumption. Therefore, you end up withvery little money left no matter how high your annual income.
If you want to build wealth through investing,you must rethink your consumption habits. To do that, you must not worry about what others think.
When I was at my previous job, I was laughed at for buying a lightweight Tant car, but there is no better car for transporting a child in a child seat. It reduces daily stress and keeps costs down, and I’m convinced it was the best choice.
Even in investing,the successful are not people who follow the crowd, but rather those who are unconventional. You must hold your own beliefs and have the resolve to stick to them. Developing your own spending habits is also important for sharpening your investment skills.
Find good companies
To find good companies worth investing in,you must keep your antennae elevated in daily life.
If you see a long line in the street, you should study the company behind the business, and eventually your. If you have room, researching the company’s competitors will reveal even more about inter-company advantages.
A useful tool for researching companies isMonex Securities’ “Stock Scanner”. It lets you see an overview of the company, segment-by-segment performance, and ten-year results at a glance. It’s free to use if you have an account, so I recommend it.
With this, you can quickly determine what kind of company a concern is, whether earnings and stock price are rising, and whether the stock is undervalued or overvalued. The ten-year performance and “Products handled” information, among others,are more comprehensive than in the Quarterly Reports.
Just looking isn’t enough.What matters is to think about it.
Note whether earnings seem to grow, what risks exist, and what events might push the stock price up, and write them down. If you can express them in your own words, you’ll be an advanced investor.
By repeating this, you’ll find better companies and build your own“desired stock list”.
Buy when they fall
Even if you have a “desired stock list,” don’t rush to buy. Because,the determining factor for investment success is the timing of buying.
In value investing, buying at a price lower than the company's intrinsic value is all that matters, so you should aim to buy at the cheapest price possible. In other words, the timing to buy is when the price has fallen..
Major crashes like the Lehman Shock are ideal opportunities, but they don’t happen often. On the other hand,there are relatively large declines two to three times a year.
Even in 2018 there were three big drops in 2, 10, and 12 months. In such times you should finally buy the stocks on your “desired stock list.”
Monex Securities articles also cite the same idea from renowned individual investorInvest Doctor.
This is really the essence.
”I think the most ideal is to buy stocks that are undervalued by fundamentals at the market bottom technically. Recently, the China shock and the Christmas 2018 are fresh in memory.”info.monex.co.jp/news/2019/2019…
To put this into practice,you must patiently wait for stock prices to fall and then buy bravely when others are terrified. It requires mental toughness, but such actions are rewarded with a high probability.
Since I started doing this myself, my investment performance has improved reliably. Unrealized losses have decreased, and profits when prices rise have grown.
“Pilot operation”
What Tsubame Investment Advisor aims for
Still, beginners may feel anxious about starting to invest. Many worry about “what if I lose money,” and hesitate.
However, that hesitation prevents you from becoming an investor. You may lose money at first, butthe probability of turning a profit increases over time if you develop correct habits. Long-term stock investing is a game with a positive expectation.
Tsubame Investment Advisor aims tohelp investors develop correct habits. We present good companies (recommended stocks) and tell you when to buy them. Since we execute the trades ourselves, members simply imitate us.
We also answer questions. If you ask about a company you’re interested in, we’ll share the points to look at for investing (up to one stock per month). Members can also view other members’ questions and answers, which is ideal for building investing skills.
This service is for people who want to start investing,people who aren’t succeeding in investing,and people who want to consult someone. You can join for one month to try it; if you’re curious, please join. The enrollment fee is currently waived.
Tsubame Investment Advisor’s Investment Advisory Contract
Join us to develop correct investing habits together and aim for a prosperous life.
