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The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
The Key To Success In The Stock Market
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The Key To Success In The Stock Market

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These principles will increase your chances of successfully investing in stocks. …

These principles will increase your chances of successfully investing in stocks.

These are the same principles we implement in our Focused Equity Portfolio at Freedom Financial Solutions.

Published in: Economy & Finance, Business
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  • 1. The KEY to Success in the Stock Market Adam Zuercher, CPA, CFP® Freedom Financial Solutions, LLC 419-425-2400 azuercher@ffsllc.com 1
  • 2. Warren Buffett’s Rules “The first rule of investing is don’t lose 1. money.” “The second rule is don’t forget rule 2. number one.” “Be fearful when others are greedy, and 3. be greedy when others are fearful.” 2
  • 3. Remember this… buy QUALITY businesses @ ATTRACTIVE prices, … sell when quality DETERIORITES or when price is OVERVALUED 3
  • 4. Think like a BUSINESS owner, not like a STOCK trader “If you’re not willing to own a stock for 10  years, do not even think about owning it for 10 minutes.” –Warren Buffett “Analyzing a company’s stock on the basis of  earnings and assets is no different from analyzing a local laundromat, drugstore, or apartment building that you might want to buy. Although it’s easy to forget sometimes, a share of stock is not a lottery ticket. It’s part ownership of a business.” –Peter Lynch 4
  • 5. Buy QUALITY businesses Strong financial condition  Earnings stability (high predictability)  A dividend payer  Earnings growth  High return on equity (ROE)  Prefer 15% +  Long-term competitive advantage (wide  moat) 5
  • 6. @ ATTRACTIVE prices: Low price to earnings ratio (P/E) Price-Earnings (P/E) Ratio = a measure of the multiple of earnings  at which a stock sells. Determined by dividing a stock’s price by its earnings per share The P/E ratio represents the “expensiveness” of a stock  Look for quality companies with low P/E ratios – your goal is to buy  earnings as cheap as possible The P/E Ratio can be thought of as the number of years it will take  the company to earn back the amount of your initial investment (assuming that the company’s earnings stay constant) Example: Buy 100 shares ABC for $3,500; current e.p.s. = $3.50; the  original investment will be earned back over 10 years; P/E = 10 6
  • 7. @ ATTRACTIVE prices: … high earnings yield (E/P) Earnings Yield = earnings / price  Earnings Yield = inverse of the PE Ratio  P/E Ratio E/P or Earnings Yield  25 4.0% 20 5.0% 15 6.7% 10 10.0% Suggested Rule: Your earnings yield should be at least  as high as the current high-grade bond rate. (10 Year Treasury Note Yield) 7
  • 8. @ ATTRACTIVE prices: An attractive investment ROE > PE  = quality business at a bargain price (most of the  time) 8
  • 9. Sell when… QUALITY deteriorates  Declining…  ROE  Dividends  EPS  Detrimental change in management or business  focus Misinformation  PRICE is overvalued  9
  • 10. MISTAKES TO AVOID: 1. Reacting to emotion. 2. Speculating. 3. Failing to do your own research. 10
  • 11. The Cycle of Market Emotions 11
  • 12. Advice from the media? 12
  • 13. Investment Temperament Stay within your CIRCLE OF  COMPETENCE invest only in what you understand 1. don’t speculate 2. Be DISCIPLINED  …about doing your homework 1. ignore the noise from the crowd & 2. the media Be PATIENT  avoid emotional investing 1. think long-term 2. 13
  • 14. The KEY to success in stocks… buy QUALITY businesses @ ATTRACTIVE prices, … sell when quality DETERIORITES or when price is OVERVALUED 14
  • 15. www.ffsllc.com Our mission is to provide wealth creation and wealth management solutions that enable our clients to achieve financial freedom. 15 INDEPENDENT | FEE-ONLY | PRUDENT INVESTING | PRIVATELY MANAGED ACCOUNTS | EXCELLENT SERVICE
  • 16. www.ffsllc.com Firm Co-founders: Tony Hixon (left) Adam Zuercher (right) Freedom Financial Solutions is an independent, fee-only investment management firm. We invite you to experience the peace of mind that comes from having your money professionally managed by people who take a genuine interest in you, your family, and your goals. 16
  • 17. information presented is past performance. Investment return and principal value of debt and equity The securities will fluctuate so that an investor’s shares on redemption may be worth more or less than the original cost. are risks involved with investing, including loss of principal. There addition to the normal risks associated with equity investing, narrowly focused investments and In investments in smaller companies typically exhibit higher volatility. indices illustrated herein are unmanaged indices. You cannot invest in an index. Index returns do not The reflect the impact of any management fees, transaction costs or expenses. The index information seen here is for illustrative purposes only. For more information, please consult your financial advisors. performance does not guarantee future results. Past stocks used in this presentation are used for illustration purposes only. Freedom Financial Specific Solutions does not endorse an investment in these stocks. concepts presented here do not constitute an all inclusive investment strategy. The 17

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