Can effective investing in stocks and shares really be this simple?

Less can be more. And, for me, simple investments can be better than complex investment strategies.

In my time, I have witnessed some impressive writings about business and stocks posted in various places.

It is equally significant. Detailed in every way, and evidence of many hours of focused research and analysis.

Where is the gain?

But all these works did not benefit the author with many benefits. In fact, many highly researched stocks take a dive and lose money for shareholders.

Such results seem so common that I almost believe there is an inverse relationship between research and results. You know, the more time you spend on research, the worse the investment results. That’s how it is.

However, I believe in doing your own research. It is important. But the problem is all about how much. And spend too long with the risk of brainwashing your own business to believe that it can not fail!

However, although as shareholders we like to think of ourselves as business owners, we do not know the inside information. We may not know everything that happens in the company. We only know information that companies choose to release.

Therefore, we can only work with publicly available information and records of the company’s trading and financial results. And that means the process of investing in stocks and shares is all about anticipating possibilities.

Six simple steps

Therefore, I have chosen a simpler approach to research. And the first priority is to check the basics. So, I’m looking for a business with a strong balance sheet. After all, poor financing can lead to negative investment results. And it can sink a company even if they trade well.

Second, I look for companies with good quality indicators because they suggest a well-defended and profitable trading niche. And third, I’m after a long runway of potential growth ahead. The businesses in my stock portfolio should earn money by increasing their income streams over time.

My fourth insight relies on the realization that a business is not the same as a company’s stock. I can find the best business, grow it and still have a bad long-term investment. And because of speculation, sentiment and other factors can cause stocks to swing above or below what the business is actually worth.

And the way we can relate the business to the stock is by looking at its value. So, the fifth consideration is to find a business with value that makes it a long-term investment.

Management integrity

For me, then, over-analysis goes out the window. My choice is to outsource business analysis and strategic planning to company directors. But it is important to require integrity from the management team. Therefore, as condition number six, it is something that I look forward to and monitor when I hold stocks.

Even with this approach, it is still possible to lose money. And because all businesses and stocks have risks as well as potential positives. However, I believe that effective investing in stocks and shares is very easy.