Eight Keys for Success: The Investment Plan

Episode Transcript

Speaker 1 (00:00):
Inning is six thirty six good morning on this Monday
before Thanksgiving, and it's part of my annual pre Thanksgiving tradition,
my eight keys for success. And we are up to
the investment plan now. Most people who are inclined to
invest on their own tend to have different reasons why

(00:21):
they're investing, but not reasons for selling. My approach is simple,
at least to explain. The reasons you invest should be
the reasons you sell. The reasons you invest should be
the reasons you sell. Here's how it works. Prior to
making an investment, establish a minimum of three concrete reasons

(00:44):
for entering into an investment. I'll give you three basic
questions one might use for say, conservative stock market based investing.
Does the company have more cash cash than dead on
its balance sheet? Is the company growing revenue year over year?
Is the company paying a dividend that's stable or growing? Okay,

(01:09):
those are just three illustrative questions, and by actually having
and illustrating the reasons why you enter an investment, it
also provides a roadmap to exit an investment. In this example,
let's say that two of those three reasons for originally
investing were to change for the negative company takes on

(01:31):
a bunch of debt, balance sheet isn't good anymore. Or
let's say the company actually is no longer growing revenue
and it's going the other way. I mean, if you
have a company that's taking out a bunch of debt
and shrinking revenue, probably not a good idea to hang
on to that investment over the long term. Right. So
what you do is you keep an eye on these
things and you know when it's time to sell. It

(01:58):
takes all the emotion out of the process. It provides
specific guidance for sound investing and selling. But the importance
of establishing at least three reasons is to also ensure
you're making an informed decision. If, for example, you are
to consider making an investment just because you think whatever
you're considering is going to move higher in price. For

(02:19):
people who want to invest but haven't really done much
due diligence, I'll hear that, well, it's going to go higher.
Why is it going to go higher? Well, a lot
of people like it. That means nothing. You're simply hoping
to get lucky. That kind of strategy people simply hoping
to get lot lucky, hope and luck aren't reasons to invest.

(02:40):
There are reasons people buy lottery tickets and gamble, So
applying this basic principle will help you ensure that you've
done at least a minimal amount of due diligence prior
to opening an investment, as well well that who's ready
for retirement. My first rule of retirement is next