BC LONGTERMINVESTINGPSYCHOLOGY
Saved by @Holla_Naveen

Panic selling once can destroy years of good investment decisions in an instant

but keeping your head on straight when your portfolio is tanking is hard

Here are 13 investing tips/tricks/principles that I use to keep calm when my portfolio is in free fall:

 1/ Know what you own and why you own it

You can borrow stock ideas from other investors, but you can’t borrow conviction

You must understand the bull AND bear case upfront, otherwise you won’t have the conviction to hold when the price is going down
Research builds conviction

Conviction enables patience

Patience builds wealth

If a 20% drop shakes your confidence in a business, you didn’t do enough research
2/ Know what drives long-term stock returns

In the short-term, emotions & computer algorithms determine stock prices

In the long-term, profit growth determine stock prices

This is a core investing principle that you must fully embrace
Look at these long-term charts of $MSFT, $HD, and $AAPL

Net income growth & stock price growth are closely linked in the long-term

That’s not a coincidence — profit growth IS WHAT DRIVES long-term value creation
3/ Buy in stages

It’s tempting to want to go “all-in” when you find an exciting new stock idea

But, what if you are wrong about the business or management?

Or, what if you are right about the business but wrong about the valuation?
Force yourself to scale into a stock over time

My personal process is to buy in 0.5% increments and add over months/years as my conviction builds

If I’m right, a little is all I need to do great

If I’m wrong, I won’t be hurt much
4/ Study market history

Every great stock — WITHOUT EXCEPTION! — will get killed at some point

This isn’t a bug — it’s how investing works

You must embrace the fact that volatility is NORMAL
Consider $AMZN’s history:

It has declined:
10% - 30 times
20% - 14 times
30% - 8 times
40% - 5 times
50% - 4 times
90% - 1 time

Returns since IPO: 164,400%
5/ Increase trading friction

Trading is tempting when it’s on your phone & easy to do

My broker is Interactive Brokers

It’s a PAIN to log in

It's a PAIN to place a trade

I love the friction -- I have to really want it to trade
6/ Keep some cash on the sidelines

Cash is a drag on returns during bull markets

Cash is the raw material of superior returns in bear markets
Create a cash deployment strategy and follow it!

Or, steal from @morganhousel
7/ Avoid margin & options

Handling the emotional swings of common stock ownership is hard

Those swings get much, much wilder when you use margin and/or options

Compounding interest is all the leverage you need!
8/ Connect with other long-term investors

Never invest alone!

A good community is worth its weight in gold

Ask: Does your social media feed make you calmer or stressed out?

If it is stressed out, upgrade your feed!
These FinTwit follows will make you calmer:
@awealthofcs
@dmuthuk
@iancassel
@michaelbatnick
@orangebook_
@TMFStoffel

These podcasts can help:

https://t.co/PBRmYEopNd
9/ Keep your personal finances conservative

Markets are volatile during economic downturns

Economic downturns are also when your job is most at risk

That’s A LOT to deal with if you have debt & 1 source of income

Eliminate debt, build cash, & create new sources of income
10/ Force yourself to journal BEFORE you transact

I keep a simple investing journal

Before I buy/sell, I have to write down WHY

It slows me down, but forces me to think things through
11) Make your investment decisions on the weekend

The weekday is full of distractions

Eliminate that factor by making all your important financial decisions on the weekend
12) Stop watching the news

Voluntarily watching the news is like inviting Debbie Downer into your home and asking her to talk non-stop

If the news is really that important, it will find you!
13/ Zoom out

Whenever I feel bad about my near-term returns, I zoom out and look at my long-term returns

It always makes me feel better
Stocks are the best asset class over the long-term

But the price of that returns is:

1⃣Perpetual Short-term Volatility
2⃣Perpetual Uncertainty

PAY IT!
Enjoy this thread?

I regularly tweet about money, investing, and self-improvement

If those topics interest you, follow me @brianferoldi

You may enjoy all the other threads that I’ve written

https://t.co/9zUKu1NhAl
If you want to learn more about investing,

I teach beginners how to researching investments on my YouTube Channel

https://t.co/VRHp4ZtRcz
Summary:

1: Know what you own
2: Know what drives returns
3: Buy in stages
4: Study history
5: Increase trading friction
6: Cash!
7: Avoid margin & options
8: Community!
9: Personal finances
10: Journal
11: Make decisions on the weekend
12: Stop watching the news
13: Zoom out

More from Brian Feroldi

Brian Feroldi
Brian Feroldi
@BrianFeroldi
1/ My most popular tweets of 2020 by month (thread)

January:

A reminder of @morganhousel cash strategy.

For every $1,000 in cash:

More: ⬇️⬇️⬇️⬇️⬇️


2/ February

If you've truly found the next $AMZN, $AAPL, or $NFLX and can hold for years, it's nearly impossible to overpay.

But finding them is hard.

3/ March

Millennials have seen tech crash, 2008, and now #COVID19

I'm worried that many of them will swear off the stock market -- the greatest wealth-building device ever -- for life.

4/ April

Want to see the checklists used by

Buffet
Dalio
Fischer
Graham
Greenblatt
Klarman
Marks
Munger

and

5/ May

When the P/E ratio is:

Useless (Stage 1, 4) - $MDB, $SHOP, $PINS, $GME, $JCP

Semi-useful (Stage 2) - $TTD, $NFLX

Useful! (Stage 3) - $MSFT, $AAPL, $V

In determining valuation
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Brian Feroldi
Brian Feroldi
@BrianFeroldi
Last week, I asked my followers to share their favorite Twitter threads

I receive tons of wonderful replies and read through them all

Here are 31 amazing threads that are well worth your time ⬇️

1/ @10kdiver on


2/ @aaronbush100 on 20 semi-controversial investing


3/ @annieduke on category


4/ @awilkinson on losing
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Brian Feroldi (\U0001f9e0,\U0001f4c8)
Brian Feroldi (🧠,📈)...
@BrianFeroldi
If you pick stocks, you MUST learn how to read an income statement.

Here’s everything you need to know:

The income statement shows a company’s revenue and expenses over a period of time, usually a quarter or year.

It’s also called:
▪️Profit and Loss statement, or “P & L”
▪️Statement of earnings

It follows this basic format:


Most public companies show their income statement in their quarterly earnings press release, but not always

Find them by looking at:
▪️10-Q (quarterly report)
▪️10-K (annual report)
▪️Aggregator websites like @theTIKR


Let's use Home Depot fiscal 2021 as an example

Step 1: Get the data
▪️ Go to https://t.co/OO3BfNGWVl
▪️ Search "HD"
▪️ Click the "10-K" from March 23rd
▪️ Scroll to "Statement of earnings"


The income statement flows in a step-down manner.

The top number is revenue (sales), and costs + expenses are subtracted as you go down
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Brian Feroldi
Brian Feroldi
@BrianFeroldi
I asked, “What are the first metrics that you look at when evaluating a new stock?”

I received 322 replies

Here are 10 great metrics to look at first (and how to find them):

1/ Market Capitalization

Why: Shows the current size/scale of the business

Where: @YahooFinance (image), @theTIKR , @KoyfinCharts ...etc


2/ Sales Growth Rate

Why: Shows the business model works & current growth rate

Where: @stockcardhq (image), SEC filings, @theTIKR...etc


3/ Free Cash Flow

Why: Is business generating cash or burning cash?

Where: @YahooFinance (image), SEC Filings, @stockrow1...etc


4/ Returns on capital (ROE, ROIC, ROA)

Why: Shows capital efficiency of business

Where: @stockrow1 (image) , @ycharts , @YahooFinance...etc
FUNDAMENTAL , FUNDAMENTAL ANALYSIS
Brian Feroldi (\U0001f9e0,\U0001f4c8)
Brian Feroldi (🧠,📈)...
@BrianFeroldi
5 YouTube videos that will make you a better investor:

1/ How to read an income

2/ How to read a balance

3/ How to read a cash flow

4/ How to judge a management
ACCOUNTING

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Brianne Kimmel 💬...
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Shocking fact: Millennial men are less likely to work than any other age and gender demographic in America.

Today, there are 500,000 young men missing from the U.S. workforce.

Research suggests video games & improved leisure tech plays a role in the problem. 👇 Thread:

Following the 2007 to 2009 recession, 25 to 34 year old men exited high school with fewer middle-skill job opportunities than years prior.

During this time, we saw an increased number of men living with parents & choosing unemployment over lower paying jobs.

It's estimated that 24M millennials live w/ their parents.

1 in 4 living in their parents’ home neither go to school nor work.

What's more surprising? 9 in 10 who lived with their parents a year ago are still living there w/ no plans to leave.

Economists are calling millennial men a lost generation.

According to economist David Dorn:

“If you get to the point where you’re turning 30, you’ve never held a real job and you don’t have a college education, then it is very hard to recover at that point.”

Economists suggest this choosiness is a generational trait.

Forbes interview w/ a high school educated man:

"I’m very quick to get frustrated when people refuse to pay me what I’m worth."
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Act of 1871
This is Long but it will end with a BOOM

With no constitutional authority to do so, Congress created a separate form of government for the District of Columbia, a ten-mile square parcel of land (see, Acts of the Forty-first Congress,”

Section 34, Session III, chapters 61 and 62).
The act — passed when the country was weakened and financially depleted in the aftermath of the Civil War — was a strategic move by foreign interests (international bankers) who were intent upon gaining a stranglehold on the coffers

and neck of America.
Congress cut a deal with the international bankers (specifically Rothschilds of London) to incur a DEBT to said bankers. Because the bankers were not about to lend money to a floundering nation without serious stipulations, they devised a way to get their

foot in the door of the United States.
The Act of 1871 formed a corporation called THE UNITED STATES. The corporation, OWNED by foreign interests, moved in and shoved the original Constitution into a dustbin.

With the Act of 1871, the organic Constitution was defaced — in effect vandalized and sabotage — when the title was capitalized and the word “for” was changed to “of” in the title.
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An irony of facebook's situation.

Sheryl got her MBA at Harvard. One of the most famous cases (Extra Strength Tylenol) in one of the most famous classes (Business History) she took: in 1982, someone put cyanide in Extra Strength Tylenol capsules and killed 7 people in Chicago.

What do you do when someone turns your product into a weapon? When they use the system you built to harm? James Burke, CEO of J&J, was shockingly open with the public, he pulled the product and made significant packaging changes to make product safer (but not tamper-proof).

He over-shared every step along the way re investigation, redesign, stood up as both CEO and human. The reintroduction of new Extra Strength Tylenol succeeded. Burke saved the brand.

But four years later it happened again. A killer put cyanide in the capsules, this time a woman in Yonkers died. Same CEO, Burke, pulled the product again, completely changed the form factor from capsule to caplet and relaunched *again*. It worked *again*. How'd they do that?

Burke (CEO) tapped J&Js goodwill bank account w/ the public. Two big withdrawals from that bank account in four years + 8 dead bodies! But his honesty, openness, humanity (choked up about the deaths more than once), humility kept the goodwill bank balance positive the whole time.
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Noah Smith
Noah Smith
@Noahpinion
Remember: Just because an idea is old doesn't mean it's good.

Knowing whether old ideas are more likely to be good requires understanding whether conditions have changed in important ways.

Horse archery was an amazing method of warfare for over a thousand years...then people invented guns, and suddenly this great idea that had stood the test of time became obsolete.

Then again, when underlying conditions don't change much, tried-and-true approaches are probably better.

"Learning the lessons of history" usually just means assuming ergodicity and stationarity in an informal time-series model...

(end)
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Laurie Voss
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The 2018 State of JavaScript survey is out. They got 20,000 responses and have some delicious, delicious data. I'mma thread in some highlights:

First up: JavaScript flavors. There's TypeScript at 47% adoption, a tad higher than npm's own survey results (which said 46%). npm's survey is coming up again soon and will ask about TypeScript in a lot more detail.


I really, *really* like SoJ's "would not use again" question, which lets people who've abandoned a tech self-identify. This is noticeable in the graph above with Flow users -- 41% of people who've used Flow say they wouldn't use it again.

Now JavaScript frameworks. It's been a full year since npm's survey, so these numbers differ from ours in the directions I expected:
React 65% (vs. 60%)
Vue 29% (vs. 24%)
Ember 5% (vs 4%, I was expecting a bigger rise)

But there's a shocker in here: Angular.


npm's survey had Angular at 40% last year and SoJ has it at either:
- 58% (if you include those who don't want to use it again)
- 24% (if you count only those who like it)
Since npm's question didn't ask if they intend to *continue* using it I think that might explain this.
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