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How to Be a Stock Market Superhero, Even If You're Poor

May 31, 2012 | Comments: 0 | Views: 257

Recently, I was given one of the more heartfelt compliments of my entire life. After chatting with an older gentleman at my bartending job and giving him a few investment insights, he called me a 'stock superhero.' Apparently, to this man, he could tell I knew what I was talking about and he was enthused that I was thinking about this stuff at 26 years old. Consequently, he said I'll be "more rich than I can imagine" or something along those lines. It's great to have older generations confirm my thinking and lifestyle.

This got me thinking, how did I become a 'stock superhero', all the while working part time jobs and making an income below the poverty line in Canada?

On the stock market end of things, I consider myself an investor and not a speculator. Call me old fashioned, but I invest in businesses because I believe the underlying company will continue to improve over the long term, not because the chart looks good or the volume is heavy. I will not put my money on the line if there is no fundamental reason in doing so. Being an investor means having specific fundamentally driven reasons for making an investment, (ie. earnings are growing steadily, no debt, there's a niche, company is relatively underfollowed etc.) anything else is considered speculation.

As an investor, I do not consider the macroeconomic environment when making investment decisions. To me, the Euro Crisis is insignificant - I'm more worried about how a television broadcaster will continue to grow by launching new channels and increasing its subscriber base. When you're investing, there are always seemingly big problems to worry about, yet if you focus strictly on each company's fundamentals, you do not have to worry about large scale problems.

It's a big mistake to let macro problems stop you from investing in terrific businesses. I cringe when I hear someone who's 'all in' to bonds because they are scared of the Euro Crisis. There will always be fantastic growing businesses, despite whatever crisis the media is spinning this time. Equating the 'Euro Crisis' with 'OMG I can't invest in any stocks because there is so much uncertainty out there' is a mistake that has cost a lot of people a lot of money over time. Do you think Warren Buffett stopped investing in stocks through the countless crises he lived through? No - in fact, this is when he does most of his buying, when everyone else is fearful and prices are depressed.

Don't let fear win. Stop letting the media dictate your financial decisions. The media spreads fear, that's how they make their money.

To be a stock superhero, you have to learn from stock gurus of the past like Warren Buffett, Benjamin Graham, Ken Fisher and my personal favorite, Peter Lynch. I found that by learning about each one's approach to investing, you can build your own investing style as a hybrid of all their different methods.

My personal style borrows heavily from Mr. Lynch's teachings. His books speak about looking into parts of the market that are generally underappreciated and underfollowed by Wall Street. Usually these companies are small, lightly traded and operate in boring, mundane industries. Looking in this area for companies that have a history of steady earnings growth, no debt and trade at reasonable valuations can be very profitable. I mix Mr. Lynch's methods with that of Buffett's, which focuses on companies that have a durable competitive advantage and detachment from market fluctuations. I also adhere to Buffett's principal of investing in what you can understand or what he calls staying within your "circle of competence." If I have a hard time grasping what the company does, I won't invest in it.

To be a successful stock market superhero requires you to think independently as an investor and a saver. If you are poor like me, independent thinking becomes even more important because there is less money to invest, and therefore less money to waste in real life. You must make tough independent choices every day to be able to save enough money to have a meaningful wealth building plan.

Please email me with any questions or comments. I'm John, my passion in life is teaching about saving money, investing and stocks. Glad to answer questions or chat. john@riseofamillionaire.com

John Laframboise is founder and author at http://www.riseofamillionaire.com, a personal finance Blog that follows his progress to become a millionaire. John has held positions within the Canadian banking industry and has a Bachelor of Commerce from the University of Windsor in Canada.

Source: EzineArticles
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