Summary List Placement
I didn’t learn a whole lot about money in school, but I was lucky to have a family that made it a point to teach me how to manage my finances. When I think back to where I picked up much of my basic financial knowledge, I picture summer trips to visit my grandparents in Fayetteville, Arkansas.
I was lucky to grow up with a grandpa who was a business school professor. He earned his graduate degree from Columbia University, where he took classes from famed investor Benjamin Graham, author of “The Intelligent Investor.”
While he didn’t teach me the same marketing lessons he shared in the classroom, he taught me lessons about the stock market that are an important part of my investment strategy. I know they work, too, since my grandpa’s buy-and-hold investing strategy helped him become a millionaire.
Here are three important lessons from my grandpa Joe that you can use to boost your long-term investment results.
Understand the companies behind the stocks you buy
Tesla and Apple have both been in the headlines recently, as their stock prices went so high that company leaders decided it was time for a split. That means pre-split shareholders will get more shares that are worth less each, for the same total value they had before. But one important part of a stock split is understanding that the fundamentals of the company have not changed.
Stock prices go up and down, but the company’s total intrinsic value is the true driver of the stock’s value. My grandpa wouldn’t buy a stock on a whim or based on a recent market trend. He would look at tried-and-true fundamental indicators, including the company’s revenue and profit trends, to make sure he understood the company he was buying.
That doesn’t mean you need to be a biochemist to buy a biotech stock or a software engineer to buy a tech stock. But taking the time to understand how the company makes money and how it’s performing is well worth it when making decisions about your portfolio.
Keep track of your investment performance
Some of my most favorite memories in Fayetteville began with a trip to the downtown bank where my grandpa could look up stock prices on a computer terminal in the lobby. Before most of us had home internet, my grandpa would dutifully head to the bank to update a paper spreadsheet tracking his stock prices.
For long-term fund investors or those who use robo-advisers, you can set up your portfolio and forget about it for the most part. But if you invest in single stocks, as my grandpa did, it’s important to track your investment performance so you can decide if it’s still worth holding.
By tracking the value of his portfolio, my grandpa could make educated decisions about whether or not certain stocks remained the right fit for his investment goals. I generally buy to hold for a decade or more, but occasionally, a company’s performance justifies selling earlier than …read more
Source:: Business Insider