The 4 Steps of Stock Investing
Whenever friends ask me what stocks to buy? I will answer that if I tell them “what stocks to buy” is only 1 step out of the 4 steps of the investing process and it will not be complete unless I show them the entire 4 steps.
Lets take a look at the 4 steps A-B-C-D stock investment process:
A – Assess: Going though this step will give the answer to what most people ask. “What stocks to buy?” When we are able to assess winning stocks (I rather call stocks = “businesses”) the rest, we will know which stocks to shortlist. After we do that, we can move on to step 2.
B – Buy: Ah ha. Hold your horses. Although step 2 is “Buy”, it does not mean we buy anytime and anyhow. We only buy when the business (stock) is at a discount. In this step, we calculate and find out how much the business is worth. Only then should we take a look at the current stock price and see if it is at a discount. By at a discount, I mean the stock price is below what it is worth. Well, if we find a winning stock (Step 1) and calculate its worth, but realise that the stock is not at a discount, we should WAIT. But if it is at a discount, we can buy the stock.
C – Cash
In stock investments, many people do not know how to cash it. This is something I formulated years back when I was studying and researching on how to create consistent passive income at very low risk. One obvious way is by receiving dividends. The other less known way is through sales of options. Yes – selling options. This is not options trading. it is based on Value investing. It is my personal strategy which I termed as VIOs – Value Investing Options Strategies. I will talk more about it in subsequent postings.
D – Delete
We must know when to delete this stock from our portfolio. Yes, when to sell? Not knowing when to sell can make you lose your money. But this comes from knowing why you buy the stock and at what price is it worth.
This should give you an overview of the entire process. I will share from insights as we move along.