Investment_Thesis_2.13.24
00:00:00.000 | [MUSIC PLAYING]
00:00:08.440 | Hello, everybody.
00:00:09.140 | It's Sam from the Financial Samurai podcast.
00:00:11.600 | And in this episode, I want to talk
00:00:13.080 | about overcoming your fear of investing
00:00:16.880 | by coming up with an investment thesis.
00:00:19.720 | I've been investing since 1996, when I had my first Ameritrade
00:00:24.040 | account.
00:00:25.000 | Made some money, lost a bunch of money,
00:00:27.800 | made a lot of money during the first dot-com boom,
00:00:30.920 | and then subsequently lost a lot of money.
00:00:33.840 | So I've been going up and down this roller
00:00:36.160 | coaster for a while now.
00:00:38.040 | But thankfully, thanks to the bull market,
00:00:40.800 | it's generally gone well.
00:00:43.280 | Now over time, over the years since I
00:00:45.680 | started writing on Financial Samurai in 2009,
00:00:48.600 | I have noticed some people who are unwilling to put
00:00:52.720 | their capital into risk assets like stocks, real estate,
00:00:56.700 | or any other type of asset that has no guaranteed return.
00:01:00.680 | As a result, over time, they fall behind inflation.
00:01:04.560 | Inflation has been recently running at about 3%, 3.5%.
00:01:09.080 | It was as high as 9.1% in mid-2022.
00:01:12.880 | So over time, the value of your cash,
00:01:15.680 | which generally pays less than inflation, gets whittled away.
00:01:20.480 | And that's not good.
00:01:21.720 | Inflation right now is probably a top three financial issue
00:01:25.520 | for the American public.
00:01:27.160 | And the only way to overcome inflation
00:01:29.440 | is by investing long-term in risk assets such as stocks,
00:01:33.640 | real estate, and more.
00:01:34.900 | When I was in my 20s and early 30s,
00:01:37.880 | I was a very active trader, wild trader, undisciplined trader.
00:01:43.640 | If I saw a 10% gain, oftentimes I would just sell.
00:01:47.240 | And then I would pay short-term capital gains tax.
00:01:50.040 | And then over time, after I racked up many, many trades
00:01:54.080 | and also had to do my taxes at the end of the year
00:01:56.280 | where I had to consolidate those trades
00:01:57.900 | and see how much I made and lost,
00:01:59.360 | I realized I was wasting a lot of time
00:02:02.520 | going in and out of securities.
00:02:04.320 | Sometimes I made money.
00:02:05.400 | Sometimes I lost money.
00:02:06.720 | Or sometimes I just broke even.
00:02:08.000 | What a waste of time.
00:02:09.360 | And it was a career-limiting move for me
00:02:11.200 | because instead of focusing on my job,
00:02:13.560 | I was almost hooked to trading in the markets
00:02:15.720 | because I was sitting on the trading floor.
00:02:17.680 | Over time, I learned to buy and hold
00:02:21.480 | because as the old saying goes, time in the market
00:02:24.720 | is better than timing the market.
00:02:26.440 | I learned this the hard way through admonishments
00:02:29.880 | by my manager, who came out from New York City and asked,
00:02:33.160 | what the hell are you doing?
00:02:34.360 | You've got to focus on your job.
00:02:35.660 | I see all your trades.
00:02:37.120 | Focus.
00:02:37.880 | And it took a lot of energy to focus,
00:02:41.440 | probably because I was hooked.
00:02:44.200 | I was probably addicted to trading.
00:02:46.920 | But this time, I knew that if I didn't stop,
00:02:49.560 | my career would be at risk.
00:02:52.040 | The most important strategy I came up with to holding
00:02:56.120 | long-term was to come up with an investment
00:02:58.440 | thesis for any single investment I wanted to buy
00:03:02.440 | and any investment I had held that I continued
00:03:05.440 | to want to hold.
00:03:06.760 | The great thing about coming up with an investment thesis
00:03:09.400 | is that you don't have to be a financial analyst
00:03:12.240 | to come up with one.
00:03:13.720 | You just have to think logically about the future.
00:03:17.180 | Let me give you some examples.
00:03:19.000 | Back in 2012, when I negotiated a severance package
00:03:21.640 | from my job of 11 years and my career of 13 years
00:03:25.200 | in investment banking, I was not 100% certain I
00:03:28.920 | was doing the right thing.
00:03:30.440 | It was a multiple six-figure salary plus bonus.
00:03:34.360 | And I was only 34 years old.
00:03:36.600 | So what I did was I said, OK, I'm done with finance.
00:03:40.080 | I have a severance package.
00:03:41.200 | I have the opportunity to see what else is out there.
00:03:44.600 | So I ended up with no connections
00:03:46.400 | applying to tech jobs from Apple to Facebook
00:03:51.080 | to Google to Airbnb.
00:03:53.760 | And I basically got shut out.
00:03:56.160 | I either got ignored or I got a kind no over email.
00:04:00.860 | And this is the problem with applying to jobs
00:04:02.780 | with no connections.
00:04:04.280 | You're just sending resumes in a black hole.
00:04:07.200 | But I took the no's and the rejections in stride
00:04:10.320 | because at the time, I was focused on early retirement,
00:04:14.160 | traveling with my wife, and also writing on Financial Samurai.
00:04:17.700 | I just didn't want to have any regrets saying
00:04:20.880 | I didn't try to at least apply to these tech companies, which
00:04:24.780 | I thought were the future when I look back.
00:04:28.400 | And so I don't have any regrets.
00:04:29.760 | I tried.
00:04:30.560 | I failed.
00:04:31.680 | There you go.
00:04:32.720 | But I did come up with an investment thesis.
00:04:35.040 | And that investment thesis in 2012
00:04:37.200 | was if I am not good enough to even get an interview,
00:04:41.920 | let alone a job at one of these tech companies,
00:04:44.640 | then these tech companies must be pretty good.
00:04:47.660 | So maybe this was a coping mechanism.
00:04:49.480 | But I said, you know what?
00:04:50.960 | I am going to invest in these tech companies instead.
00:04:54.600 | So in 2012, I started buying about $10,000 to $20,000
00:04:58.400 | worth of Apple, Facebook, Google.
00:05:02.280 | And then I turned the situation around.
00:05:03.920 | And I said, if I can't work for you,
00:05:06.840 | you are going to work for me as a shareholder.
00:05:10.200 | And as long as I held these stocks,
00:05:13.760 | I am technically the boss.
00:05:15.480 | I'm the shareholder.
00:05:16.400 | You work for me.
00:05:17.400 | I'm the captain now.
00:05:18.920 | 12 years later, these holdings have done well.
00:05:22.880 | They've been able to grow large enough
00:05:24.760 | to provide for my family in terms of college education,
00:05:28.360 | and even to buy some property.
00:05:30.560 | It's been a great ride.
00:05:31.920 | Now, of course, 2012 was close to the bottom
00:05:35.480 | of the bear market, right?
00:05:36.640 | So a lot of this has to do with luck.
00:05:39.080 | However, if you look at all the historical data regarding
00:05:42.520 | at least holding the S&P 500 since 1926,
00:05:46.080 | the average compound return is about 10%.
00:05:48.760 | And if you hold the S&P 500 for at least 10 years,
00:05:53.320 | the average probability of making money is over 95%.
00:05:58.200 | And then once you're at about 18 to 19 years,
00:06:01.080 | the percentage win rate is 100%.
00:06:03.680 | So time in the market, very important.
00:06:06.800 | Now, with Apple stock, for example,
00:06:09.400 | I didn't know that it was going to outperform.
00:06:11.240 | But I felt that with the people they hired,
00:06:14.240 | with their technology, with their inventions,
00:06:17.440 | it would outperform.
00:06:18.440 | And it did outperform dramatically.
00:06:20.840 | So what now, 12 years later, for example, with Apple stock?
00:06:23.920 | And this is not investment advice for you.
00:06:27.080 | This is an example of what I'm doing
00:06:30.000 | and how I come up with the investment thesis.
00:06:32.560 | With the S&P 500 at about 5,000,
00:06:35.800 | it's at an all-time high, more or less.
00:06:38.760 | And so it's been hard for me to put new money
00:06:41.800 | to work in stocks.
00:06:43.680 | However, when Apple came out with its new Vision Pro,
00:06:47.820 | I got excited, I was interested.
00:06:50.000 | Approximately 2.2 billion people worldwide
00:06:53.120 | experience some form of visual impairment,
00:06:56.240 | while an estimated 237 million face
00:06:59.040 | moderate to severe impairment.
00:07:01.600 | And among them, 40 million are considered legally blind
00:07:04.960 | or completely blind.
00:07:06.320 | And for those who don't know,
00:07:08.200 | the definition of legally blind means
00:07:10.400 | the inability to correct your visual acuity
00:07:13.160 | to at least 2,200 with corrective lenses,
00:07:17.340 | such as contact lenses or glasses.
00:07:20.000 | Most people can correct their visual acuity
00:07:22.280 | to 2,020 to 2,040 with glasses or contacts.
00:07:27.280 | Legally blind usually does not mean complete blindness.
00:07:30.400 | There is a field of vision.
00:07:32.880 | It just means you can't correct to 2,020 to 2,040.
00:07:37.200 | Now, what does it mean, 2,200 or 2,040?
00:07:41.880 | So if someone has 2,200 vision,
00:07:45.160 | it means that they can only see clearly the details
00:07:49.760 | 20 feet away what someone can see 200 feet away.
00:07:53.960 | Again, this is after using corrective lenses,
00:07:57.440 | such as contacts or glasses.
00:07:59.560 | I think about vision a lot because someone dear to me
00:08:03.140 | has a visual impairment and I wanna help him
00:08:06.360 | see the world, learn and interact with others
00:08:10.000 | as much as possible.
00:08:11.560 | In fact, if there's one minority group
00:08:13.760 | that I'm fighting for the most,
00:08:15.640 | it's the minority group with disabilities.
00:08:18.320 | Roughly 15% of the world's population
00:08:20.920 | has some sort of disability, either mild to severe.
00:08:24.560 | And I firmly believe this is the minority group
00:08:27.660 | that the world needs to fight for,
00:08:29.600 | for equal access, equality, equity.
00:08:32.400 | My investment thesis with Apple stock now is
00:08:35.560 | the Vision Pro is a defining technology
00:08:39.480 | that will help the world see better,
00:08:41.960 | connect better and experience the world better.
00:08:45.120 | I watched a bunch of demos online as maybe you have.
00:08:49.080 | And then I took my wife to the Apple store.
00:08:51.320 | We made a date out of it.
00:08:52.840 | We first had hot pot lunch
00:08:54.920 | and then we registered online for an appointment.
00:08:57.840 | And then we did the demo, 30 minutes.
00:09:00.240 | And it was an unbelievable experience.
00:09:03.580 | The immersion, the clarity, the 3D videos.
00:09:08.520 | I couldn't believe it.
00:09:09.560 | It blew me away.
00:09:10.600 | It brought tears to my eyes.
00:09:12.360 | It was that amazing.
00:09:14.440 | During the entire 30 minute demo,
00:09:17.040 | all I could think about was how this tool,
00:09:20.640 | the Vision Pro could significantly improve
00:09:23.720 | accessibility for the visually impaired.
00:09:26.280 | The experience of the Vision Pro was equally,
00:09:29.400 | if not more impactful than when I first got
00:09:32.560 | a BlackBerry device and I could type an email
00:09:36.640 | and maybe surf the web a little bit.
00:09:39.560 | That was a pretty defining moment.
00:09:41.400 | It was similar to 1997 when I discovered Yahoo
00:09:45.680 | in the college computer labs.
00:09:47.360 | Wow, the internet, unbelievable.
00:09:49.920 | But actually, the Vision Pro blows past
00:09:53.080 | any new experience I've ever had with technology.
00:09:55.920 | It's not even close.
00:09:58.000 | Now, are there negatives?
00:09:59.080 | Yes, the price point, $3,500.
00:10:01.680 | Only the most gung-ho early adopters
00:10:04.680 | will buy the Vision Pro.
00:10:06.160 | And also, it's heavy.
00:10:07.620 | So after about 30 minutes, definitely after about an hour,
00:10:11.680 | the fit might start weighing on your head and forehead.
00:10:14.960 | You've got to get that right fit going.
00:10:16.900 | But it is clear to me the Vision Pro version 2, 3, 4
00:10:21.900 | is gonna get better and better.
00:10:24.320 | More apps are gonna be created
00:10:26.440 | and the world is gonna be better connected
00:10:28.520 | and more people will be able to experience
00:10:31.040 | and see the world better.
00:10:33.440 | So what am I gonna do with my Apple shares
00:10:35.440 | that I've held for 12 plus years?
00:10:37.820 | I'm just gonna keep holding them.
00:10:39.280 | In fact, since the stock has sold off from its $198 high,
00:10:43.960 | I'm gonna be nibbling on some more
00:10:46.140 | because I do believe in this investment thesis
00:10:48.840 | of helping the visually impaired see better.
00:10:52.360 | Let me share with you another example
00:10:53.880 | of how coming up with an investment thesis
00:10:56.200 | has helped me make a decision on my old home.
00:11:00.640 | Now, I had a decision whether to sell it
00:11:03.120 | and pay those commissions and taxes, fees, or rent it out.
00:11:08.120 | In my heart, as a 46-year-old man who is tired
00:11:11.960 | taking care of two young children and writing a lot,
00:11:15.020 | I don't want to own another investment property.
00:11:18.320 | I wanna simplify life,
00:11:20.120 | not have to deal with the maintenance hassles
00:11:22.480 | and tenant inquiries and so forth.
00:11:25.000 | However, I came up with an investment thesis
00:11:27.560 | to help me make a decision because selling in 2024,
00:11:32.320 | I think is a mistake in terms of selling real estate
00:11:35.320 | because I think rates will gradually come down.
00:11:38.200 | I think real estate is gonna catch up
00:11:40.120 | to the performance of stocks.
00:11:42.240 | And I think there's gonna be a boom,
00:11:44.220 | at least here in San Francisco.
00:11:46.700 | First of all, tech stocks since the beginning of 2023
00:11:49.660 | have seen a tremendous rise in performance.
00:11:52.780 | We've got everything from Google, Facebook, Apple up 30%
00:11:57.300 | to 70%, Nvidia continues to climb.
00:12:01.200 | Second of all, there is an artificial intelligence boom
00:12:04.580 | here in San Francisco.
00:12:06.100 | Check out The Economist's profile
00:12:07.820 | on how San Francisco has made a comeback.
00:12:10.300 | AI companies, the largest ones are all here.
00:12:13.080 | We're talking open AI, Anthropic, Databricks.
00:12:17.680 | And it was interesting because I was invited
00:12:19.760 | to invest a hundred grand or more
00:12:22.240 | in the latest fundraising for Anthropic,
00:12:25.240 | a company that's only three years old
00:12:27.040 | and they were raising at a $15 billion valuation.
00:12:31.000 | So that's from nothing to $15 billion in three years.
00:12:34.440 | And there are many smaller AI companies
00:12:37.520 | doing the same thing.
00:12:38.800 | I'm sitting here folks in ground zero.
00:12:41.200 | I'm talking to everyone.
00:12:42.800 | I'm a limited partner at several top funds,
00:12:46.220 | venture capital funds.
00:12:47.920 | And it is obvious to me, 70 plus percent of new startups
00:12:52.180 | it seems are doing AI or have some AI type of focus
00:12:56.480 | and the venture capital money is going there.
00:12:58.640 | Now, it feels a little bubblicious, right?
00:13:01.400 | Based on valuations, based on how much revenue
00:13:03.880 | is being generated, based on the valuation of the company.
00:13:06.720 | It obviously seems very bubblicious,
00:13:10.040 | just like in 2000, 2021.
00:13:12.960 | However, the momentum is there.
00:13:15.080 | And I think we can agree that AI is gonna transform
00:13:18.080 | productivity, companies, technology for decades to come.
00:13:22.220 | And I wanna be here as this transformation happens
00:13:26.200 | because I was here in the early 2000s.
00:13:30.320 | When Facebook, when Google, when public,
00:13:33.640 | my firm was part of the tombstone
00:13:35.520 | where we helped take these companies public
00:13:37.720 | and it transformed the landscape.
00:13:39.240 | It made thousands of people very wealthy
00:13:42.760 | and the real estate market did very well subsequently.
00:13:46.260 | I've been a landlord since 2005, right?
00:13:49.960 | 2005, I've gone through many, many sets of tenants
00:13:53.600 | and the majority of my tenants,
00:13:55.760 | about 65 to 70% of them, all hailed from tech companies.
00:14:00.760 | And I've seen their incomes
00:14:03.560 | because that's what I've gotta do as a landlord.
00:14:05.360 | I've got to vet them financially.
00:14:07.840 | And it seems very clear to me that this boom in wealth,
00:14:11.840 | thanks to big tech and now AI,
00:14:14.640 | is gonna happen again in 2023, 2024 and beyond.
00:14:19.320 | So in 20 years, when my kids are 24 and 26 1/2 years old,
00:14:24.320 | I don't want them coming back to me and saying,
00:14:27.920 | dad, why did you sell that property back in 2024?
00:14:33.480 | When you could have just rented it out and ridden the boom,
00:14:37.200 | the boom in the San Francisco market
00:14:39.220 | because of the boom in technology and AI.
00:14:42.560 | I don't want them telling me that
00:14:45.000 | because owning these single-family homes
00:14:47.580 | with ocean views on the west side of San Francisco
00:14:50.360 | is something that I can control.
00:14:52.480 | Being able to get a job at one of these booming companies
00:14:55.520 | is something I cannot control.
00:14:56.960 | I don't have the technical expertise
00:14:58.920 | or the connections to land these jobs
00:15:01.360 | or start these type of startups.
00:15:03.760 | It's just not me.
00:15:05.040 | So now I've got two components of my investment thesis down.
00:15:09.080 | Tech booming, AI just getting started, that's number one.
00:15:12.880 | And two, thinking about the future
00:15:15.080 | where my children inquisitively ask,
00:15:17.720 | why did you sell back in 2024
00:15:20.480 | when you could have just held on for the next 20 years
00:15:23.280 | and ridden the boom in that derivative way?
00:15:26.360 | If you held on, we could have had affordable living.
00:15:30.240 | But no, now we've got to pay $15,000 a month
00:15:34.060 | for a one-bedroom apartment in a bad part of town.
00:15:36.440 | Dad, why did you sell?
00:15:38.480 | So now I'm thinking to myself, okay, rent or sell.
00:15:41.600 | Gosh, selling just doesn't seem
00:15:44.080 | like the right time right now.
00:15:46.400 | And then here's the final part of the investment thesis
00:15:49.740 | for why I should rent out the property.
00:15:52.240 | The west side of San Francisco is booming
00:15:54.880 | due to a couple factors.
00:15:56.720 | One, there's gonna be an opening of a new school
00:15:59.800 | called the Chinese American International School
00:16:02.520 | on 19th Avenue across from Stonestown Mall, September 2024.
00:16:07.520 | The school has over 500 students
00:16:11.380 | and it's gonna be on a 5.2 acre campus.
00:16:14.720 | It's gonna be the best campus in San Francisco
00:16:17.800 | because it's gonna be the largest
00:16:19.440 | with the most amount of facilities
00:16:21.400 | and it's gonna be fully renovated.
00:16:23.480 | It goes from preschool three through the eighth grade.
00:16:27.440 | So every single year, there's gonna be
00:16:30.280 | about 60 new kids joining the school.
00:16:33.600 | And that means every single year,
00:16:36.440 | 30 to 60 families probably are going to have to look
00:16:40.240 | for property on the west side of San Francisco
00:16:43.920 | relatively near the campus.
00:16:45.480 | I would say within three miles.
00:16:48.280 | And when you have a perpetual installed base of demand
00:16:52.720 | every single year for probably forever,
00:16:56.840 | that is good for single family home property prices
00:17:00.560 | on the west side of San Francisco near the school
00:17:02.960 | because the home we used to own
00:17:04.840 | is within a couple miles of the school
00:17:06.520 | and it's a single family house
00:17:07.880 | that we would have happily raised our children in
00:17:10.520 | for the next 10 years.
00:17:12.280 | It was just that real estate FOMO got the best of me in 2023
00:17:16.600 | and I decided to buy another house.
00:17:18.600 | But this is a topic for another conversation.
00:17:21.580 | And then there's another catalyst
00:17:22.980 | for the west side of San Francisco.
00:17:24.800 | And that's the $4 billion plus remodeling
00:17:28.440 | of UCSF Parnassus Hospital and Research Center.
00:17:33.440 | I drive by it every time I send my kids to school
00:17:36.840 | and it is a sight to behold how much remodeling they've done
00:17:41.280 | on the top of this hill.
00:17:42.960 | And in 2030, once the remodeling is done,
00:17:45.960 | this is the estimate,
00:17:47.100 | the new hospital will be able to accommodate
00:17:50.440 | 1,200 to 1,400 new jobs.
00:17:54.600 | 1,200 to 1,400 new jobs just in this surrounding area
00:17:59.140 | on the west side of San Francisco, that's a lot of jobs.
00:18:02.660 | That means more demand for housing,
00:18:05.700 | more demand for coffee shops, restaurants, hardware stores,
00:18:10.360 | all this, these are local economic catalysts
00:18:13.600 | that are clearly planned out,
00:18:16.200 | that will clearly happen over the next five to 10
00:18:20.880 | to multi-decade years.
00:18:22.740 | And given there's already a housing shortage
00:18:24.920 | and it's very tough to build new housing in San Francisco,
00:18:28.680 | I see real estate prices on the west side of San Francisco,
00:18:31.980 | the more affordable side of San Francisco
00:18:34.520 | continuing to go up over the next couple of decades.
00:18:37.860 | Once I put all these points together
00:18:40.440 | for my investment thesis, I said, you know what?
00:18:42.660 | I'm just gonna hold, save my money
00:18:44.880 | in terms of paying that commission dollars
00:18:46.560 | because also I believe brokerage commissions
00:18:49.280 | will come down over time.
00:18:50.840 | Please check out the previous episode I did
00:18:53.040 | interviewing Mike Ketchmark, the trial attorney
00:18:56.160 | who won the case against the National Association
00:18:59.040 | of Realtors for price fixing and real estate collusion.
00:19:03.800 | Again, I prefer not to be a landlord to another property.
00:19:07.960 | However, based on my investment thesis, I cannot sell now
00:19:12.800 | because I'm gonna regret it, I think 10, 20 years from now.
00:19:16.640 | The next time I have some type of tenant
00:19:19.600 | or maintenance issue to make myself feel better,
00:19:22.320 | I'm just gonna revert back to my investment thesis
00:19:25.920 | that will force me to just do the work,
00:19:28.360 | stop complaining and get on with it.
00:19:30.720 | Now, owning this rental property doesn't preclude me
00:19:34.840 | from investing more passively,
00:19:36.880 | such as in private real estate funds,
00:19:39.640 | in real estate ETFs and so forth.
00:19:42.280 | It's not mutually exclusive.
00:19:43.880 | I will continue to do that
00:19:45.120 | because I want to focus more on passive income.
00:19:48.840 | Now, the tricky thing about coming up
00:19:50.640 | with an investment thesis is that you could get
00:19:53.320 | your investment thesis right, but your investment wrong.
00:19:57.320 | And you can get your investment thesis wrong,
00:19:59.440 | but still make money on your investment.
00:20:02.280 | There are multivariables that are included
00:20:06.160 | in an investment decision and you can't get them all right.
00:20:09.480 | Many factors are at play here.
00:20:11.520 | Sometimes you just get lucky.
00:20:14.080 | But as we talked about at the beginning of the show,
00:20:16.760 | the longer you stay invested,
00:20:18.960 | generally the higher the probability
00:20:21.080 | you're gonna have a positive outcome.
00:20:23.360 | So in conclusion, I wanted to share how to come up
00:20:26.800 | with a good investment thesis.
00:20:28.960 | There are 12 points.
00:20:30.480 | One, make it clear and concise.
00:20:32.920 | If you can't explain your investment thesis clearly
00:20:35.720 | to a friend or a loved one, then you're not doing it right.
00:20:38.960 | Two, it should be supported by research.
00:20:41.960 | Three, it should be aligned with your goals.
00:20:45.800 | Four, should identify investment opportunities
00:20:49.560 | here and there, right?
00:20:50.920 | You have to look for what people are missing,
00:20:54.000 | connect the dots.
00:20:55.680 | Five, you should analyze all the risks, right?
00:20:58.600 | Not only should you have blue sky and realistic scenarios,
00:21:01.480 | you should have downside scenarios as well.
00:21:03.360 | What if this is a bomb?
00:21:05.040 | What if this doesn't turn out?
00:21:07.240 | Six, you should have a time horizon.
00:21:09.920 | How long are you willing to invest in this asset?
00:21:14.080 | Or how long are you willing to give in your investment
00:21:17.240 | before you change your mind
00:21:18.800 | because management didn't come through with something?
00:21:21.800 | You should understand the company's competitive advantage
00:21:25.680 | or the city's competitive advantage
00:21:28.160 | or whatever asset class's competitive advantage.
00:21:31.280 | You should understand the financial metrics.
00:21:33.360 | That's eight.
00:21:34.800 | Nine, you should run different scenarios.
00:21:37.960 | This is scenario analysis.
00:21:40.200 | 10, your investment thesis should be adaptable and dynamic.
00:21:44.800 | Always review your investment thesis every six months,
00:21:49.200 | 12 years to make sure it's still on track.
00:21:51.760 | If it's not on track, then you've got to adjust accordingly.
00:21:55.520 | 11, you should have an exit strategy.
00:21:57.520 | At what price point will you sell
00:22:00.320 | if the stock gets to a certain level or valuation level?
00:22:03.560 | Or at what period of time are you gonna sell
00:22:06.800 | because you're 70 years old and you're seriously tired
00:22:09.240 | and you wanna enjoy the rest of your life?
00:22:11.520 | And then finally, you should communicate
00:22:13.480 | your investment thesis to not just your friends
00:22:16.000 | and loved ones, to more people, maybe strangers,
00:22:18.840 | maybe just acquaintances while you see them
00:22:21.120 | on the playground or the tennis court
00:22:22.640 | and see what they have to say
00:22:24.240 | because they will help uncover some blind spots.
00:22:27.160 | The more blind spots you uncover,
00:22:30.000 | the more you're ready to take action
00:22:32.000 | and hedge against bad things happening.
00:22:34.880 | All right, everyone, I hope you enjoyed this solo episode
00:22:37.840 | of me talking about how I think about investing
00:22:40.440 | and how you can overcome the fear of investing.
00:22:43.480 | If you come up with that investment thesis,
00:22:45.520 | I promise you, you'll feel better about investing
00:22:49.040 | and you'll feel better about holding
00:22:51.480 | over bad times and during good times.
00:22:55.120 | If you enjoyed this episode,
00:22:56.400 | I appreciate a positive review on Apple, Spotify,
00:22:59.960 | or wherever you're listening.
00:23:01.720 | And also, if you want to subscribe
00:23:03.240 | to the Financial Samurai newsletter,
00:23:05.000 | you can join 60,000 plus others
00:23:07.840 | and subscribe at financialsamurai.com/news, N-E-W-S.
00:23:12.840 | Thanks so much.
00:23:15.200 | (upbeat music)
00:23:18.320 | (upbeat music)
00:23:20.920 | you