What Should You Expect as a Beginner Investor? (w/ @ThePlainBagel)

[Music] Welcome back to the new money advent calendar! I've got another great collab coming in today. I'm joined by Richard Coffin from The Plain Bagel. How you doing Richard?

Good, how are you doing dude?

Yeah, I'm doing very well! Very well! It's good to see you, good to talk to you. It wasn't actually that long ago where we were doing another collab, so thanks for giving me even more of your time and coming back on! How have you been?

I enjoyed the last couple months. Good! It's been busy on my end. We've talked a bit about it off-camera, but my wife and I recently purchased a house, so it's a lot of renovations, stuff like that. And, you know, with the channel and working full-time, it's a lot of stuff going on, but it's all good. And I'm looking forward to the holidays coming up. It's just gonna be a bit of a break from some stuff, so that's getting real nice!

Holidays this year, you're going to feel extra good just being able to kick up your feet a little bit, especially if you get that bathroom done! You'll be a very happy man!

Kick your feet up and just relax a little. I was just explaining too, like my bathroom's gone! We just tore everything out. There's actually um, it's like, it's all the studs and stuff, and then you look over in the corner, there's a shower head sticking out of the walls!

Oh no, where things used to be!

But yeah, it's all bare bones right now.

Oh good luck with the renovation! But guys, in this video what we're going to talk about is I'm going to draw on Richard's experience a little bit here. We're going to talk about what you should expect as a beginner investor because there are obviously a lot of people get into the markets, and then once they're in the markets that's when they realize, “Oh, okay. I didn't anticipate that this was going to be the way it is.” So the first, I'll just chuck it over to you Richard and say the first thing that pops into your mind as a beginner investor, what should you expect?

I, it's kind of funny because I think the biggest thing to expect, like as a beginner, like just the first thing that comes to mind is like to chill out! Like that sounds kind of funny, but like I think like every time I go on, you know, forums and stuff about investing, you know, I see so many people talking about, you know, the next big thing and all these hot picks and things like that.

I think a lot of beginners kind of move towards that area because it's very alluring and things like that. But I think like the best thing you can do as a beginner investor is to take your time and kind of ease into the process because, and I don't know if you have the same kind of viewpoint as me, but I actually don't think, like if I were to think of in terms of averages, I don't think the average person should probably pick their own stocks for example.

Yeah.

And the reason I think that is because I just don't think a lot of people have that same passion to do that.

So I'll have to say that if you're starting off, you know, I think you need to do that work to learn about investing and to ease into it rather than going gung-ho.

Which, you know, I think there's a lot of young people who get into it. They get really, you know, excited and into the prospect of it where, I don't know, I guess they just need to chill out a little bit.

Yeah, I know! I would agree. I think that a lot of people get into investing by, you know, hearing about a stock from a friend or even maybe reading a stock market book that obviously is structured to make you really want to invest. And I think what you should expect is, you should expect that you want to try and get into the market as soon as possible because you'll hear about the compounding effect! You'll hear the sooner you start, the better it is in the long term, and blah, which is true, definitely, of course!

But it'll make you feel like you're almost, you've got this fear of missing out like, “No! I need to get into the market now!” But that's a— that's one of the things that I would typically say to my friends as well as they want to get started with investing. I say, “Look, don't rush. Okay? The stock market's still going to be there in three months’ time, in six months’ time.”

So expect, I feel like expect you want to be drawn in, but sometimes you do, like what you say, you just need to take your time and get a little bit of understanding under your belt. And maybe, you know, try some paper trading where you're just playing around and seeing how the broker works and seeing what it's like, the process and whatnot.

For sure! And like it's just funny because I think especially like the past few years have been really bad for that! Like I think, you know, we've seen, you know, crazy names coming up left, right, and center of, you know, 600% return in one year, 1000% return in some cases!

So, you know, people see that, they think, “Oh my God, like, like you said, I need to get in!” And I totally agree with you, like it is true, the earlier you start, the better! But you can start, you know, investing without starting to stock pick, if that makes sense!

Yeah! You can start, you know, be a bit more passive or go with the professional, uh, you know. A lot of people kind of scoff at that idea, but I do believe that a lot of people would be well suited to, you know, if they don't have the time and the passion, just work with the professional.

Um, or you can invest passively and, you know, use index funds and stuff like that.

Yeah, there's a lot of options out there! You don't have to go for the next big thing and all that stuff, which I think is the first area that people go to when they start investing.

Yeah, one building on that, one of the points that I had written down here is if I, I agree with you, I think that most beginner investors should probably, at least in the beginning, just stick to passive investing. Because worst comes to worst, if you're a passive investor and you've bought some market tracking investment, no matter what the market does, you can just hold that for, say, 40 years and chances are you'll do okay!

Exactly! Whereas one of the things I said—I wrote down—is that if you are thinking about, you know, wanting to pick your own stocks, one thing that I think you should expect is to not get it right every time.

Yeah, I mean, I totally agree! And I think part of the problem too with that is when you're starting off, it's obviously a lot harder if you're picking individual companies to be diversified. So, you know, I think when people get started, they kind of think, “Okay, you know, I only have enough money to buy one or three positions,” and they kind of focus on those, those, you know, call it the Teslas or whatever, like the up-and-coming positions rather than properly diversifying.

But you're right, like you will have positions that don't do well, especially when you get started, and you might not know everything to look for and stuff like that, which is why diversification is important! You know, there are people mixed in terms of, you know, how much you should diversify, but I think everyone would agree that you probably shouldn't hold just three positions or whatever.

And you should probably, you know, pet your best to some degree. You know, you shouldn't go all in on electric vehicles and nothing else, for example.

Yeah! But yeah, I think, you know, it's funny because I should also give the caveat that, um, I, you know, I'm still learning, and I work as an investment analyst for a money manager in Ottawa, Canada, and I'm still learning every day about, uh, you know, investment research and stuff like that.

So I think, you know, as someone who, you know, is still going to make mistakes and still continues to make mistakes and will in the future at some point, I, you know, it takes a long time to get really good at it and it's something that even I'm still working on. So, so yeah, of course, you're going to make mistakes when you get started.

I, you know, I think of a few positions that I started with that didn't work out, and, uh, my workplace is very constructive with stuff like that in that they gave me a lot of room to try and fail and, you know, improve. And I think, you know, I'm sure you'd agree that that's one of the best ways you learn with investing is, you know, you do your research, you kind of come up with a thesis, an idea of how things are going to work out, you buy the position, and then things either work out and then, you know, you kind of learn, “Okay, that it was positive reinforcement.”

Or things don't work out and you think, “Okay, what went wrong?”

Um, there's quite a bit of value in that reflection.

When you get something wrong, like I've probably learned 90% of what I know from getting stuff wrong!

And, uh, fortunately being in that environment where I had people who have been in the industry for 40 years, you know, giving me feedback on the work I did and stuff like that, I think it's important too. In the early days, like I'm definitely with you there, in the early days you will make some mistakes and there's kind of two types of investors.

There's the people that make the mistakes early on and then get scared away and they never come back, which is really sad.

But then there's the people that realize that, “Okay, damn it! I'm not as smart as what I thought I was. I have made some mistakes.” But, “Okay, I just have to learn from them.”

And that is so important, I think, if you're going to be a successful investor in the long term is to use those mistakes, uh, almost be happy that you've made them when you're young, because the— the way I can't remember who I was talking to about it, I was like consider how much money you have right now versus how much money your parents have versus how much money your grandparents have!

And chances are you've got the least! Your parents have the second most! Your grandparents have the most money!

So it's better if you're getting started with investing when you're like 20-something. It's far better to make your mistakes then than to make your mistakes, you know make the same mistakes when you're playing with, not thousands of dollars but maybe hundreds of thousands or millions of dollars.

You much rather make these mistakes early, learn from them because once you've made a decent mistake in the stock market, you won't make the same mistake again because you'll always be looking out for it.

Um, and just to quickly add to that too, yeah, I feel like an important kind of point for that as well is I think, uh, when it comes to learning from mistakes and stuff like that, you know, yes, you want to make mistakes early on, but also be aware that, you know, you do have your financial capacities that you need to operate within.

Uh, you know, you always hear those horror stories of some 27-year-old, you know, opening a trading account, shorting something tenfold, and then, you know, losing everything!

You aren’t indestructible! But, you know, you learn from your mistakes, but also be aware of, you know, how much risk you can take on because, you know, young people, some young people don't have the money that they can splurge on that stuff!

So, you know, take that all into consideration when you do your research! You know, you may not be in a position where you can afford to put your money in a speculative investment like other people might be able to!

So yeah, you know, I think that's something that I think some people get backwards. Some people think, “Oh, well I don't have a lot of money! I should put all my money in this big shot, you know, potential position because it might make it big and I'll make more money!”

Whereas from a portfolio management standpoint in the industry, you know, advisors will tell you, you need to, you know, adjust your risk tolerance based on your risk tolerance, what you can afford to lose and stuff like that! I think that is—

Yeah! And that goes back to your first point that you were making is sometimes it's worth just taking your time! Don't— don't necessarily dive in!

Really understand what you're going to buy because when it comes to the stock market, uh, hopefully a lot of beginners just see like stocks and they just, “Okay! I can buy into a stock!” And they don't get into some of the more exotic things out there.

But there are many situations in investing where you can lose a lot! You can! There are some situations where you can lose an unlimited amount of money! For example, what you're talking about, like shorting a stock, betting that it's going to go sour! If you get that wrong, there is no limit to how much money you can lose!

Um, what's— what's another? There are some like inverse ETFs where you can bet against the market! So if the market goes down 3%, you make 3%, but you can also have inverse leveraged ETFs where that are leveraged like three times! So if the market goes, if you get that wrong and the market goes up 3%, you go down 9%!

So I think that that's— yeah, definitely people need to really take the time to understand and understand what risks they're taking and you're trying not to go those big shot bets!

I think risk is something that usually gets put on the back burner when people start learning investments. You know, people always focus on the return side and big shot positions and stuff! And like, it's such a shame because there's so much you need to know about the risk side!

And I think that's probably the big reason why I don’t like the, like, you know, I rarely tell people that they should start picking their own stocks!

Uh, you know, unless they, unless you're passionate and you want to put the work in! But part of doing— putting that work in is learning about risks! And I think before you start investing, you need to understand, you know, interest rate risk!

You know, and that's kind of a more complicated thing, but it's important! It's something that affects almost every stock that's out there!

So I, you know, and but then you get into there's that whole other world which I, I wouldn't even— I don't even know if I’d call it investing per se because it's more of the trading and, you know, there are people in that area who will try to sell you on the idea of, you know, “Oh! All you need to do is buy call options and that's how you make all the money in investing!”

And that's— it's such a shame because I don't know anyone who's retired on a portfolio of call options! I don't know anyone who's made it 40 years on a— on a call option, you know, who wasn't like a professional trader in their career!

I don't know enough of call options. I know literally no one that's made it big through trading! But maybe I'm just in the wrong circles!

No one? I don't know anyone personally, of course! You know, you can think of— I'm sure there are big names on YouTube and probably like that!

But yeah, of course, personally, like, you know, my parents, they invested in stocks, they're doing pretty okay, and, you know, if I can do the same trajectory my parents went through, I’m totally satisfied with that!

So yeah, so okay that gets me on to my next question. So as a new investor, what should you expect financially when you get started with investing? Because I feel like if you read stock market books, if you look at courses or YouTube videos, you quite quickly get the impression that the stock market is your way to millions!

Um, so which maybe that's true in the long run, maybe not, but what would you say this is what you should expect financially as a beginner investor?

Well, I think, you know, I think a good way to gauge it is like the index is always— index historical index returns are always used as a gauge.

And I think it's a good basis to think, you know, what are the possible returns I could get?

And I think, you know, the S&P 500 is somewhere between 7% and 10% is like the 50-year average return of the S&P 500.

And that's America and, you know, they might be different for different countries and stuff like that, but, you know, with that as kind of a basis, you probably shouldn't expect to do anything exceptionally better than that return.

You know, I think some people, you know, they'll see that a position they bought increased 20% and they'll think, “Oh! Like, 20% is easy!”

But the truth is that the longer you go at it, it's very hard to maintain something like a double-digit return!

Um, so I always say like, you know, I think historical index returns are a good gauge for what to expect in terms of, you know, you're probably not going to earn 20% every year.

There's no fund or anything out there that's, uh, maybe the Medallion Fund that that hedge fund everyone talks about. Maybe outside of them, you know, there's a famous bet of Warren Buffett against hedge fund managers, you know, saying that the index funds would beat them and sure enough, they did!

Yeah! So I always say that's a good basis!

And then, like honestly, like what we're talking about, you know, you're going to make mistakes and a lot of those mistakes might be front-loaded.

So if you want to go out and you want to be that active investor who does that research, you're probably going to make mistakes, which is why, uh, you know, your returns earlier on might be worse than that.

And you know, maybe not! Maybe you'll walk out and you'll do well!

I know the past 10 years has kind of been pretty exceptional, which is why I think we've seen the rise of some of these less, uh, uh, less safe and whatnot like strategies!

Yeah! I mean popping up! But, uh, yeah, I would just say like, you know, basic expect to be somewhere in the ballpark of what the index is doing! Um, and don't come to expect double-digit returns on an annual basis!

Yeah! You might get some some years, but then there are going to be years that offset that!

Um, you can even lose money as soon as you start!

Yeah! And I think like what you're saying earlier, I think that's something that, um, is one of those things that might discourage someone from continuing investing is when they start and right away they lose money, which is a shame because we all know that, you know, if you keep at it and you keep contributing, you get that compounding!

And even though you might have lost money at the start, you should make it up over time!

Um, you know, if you're investing properly, the way the thing that I— the example that I always go back to is if you invested at the peak of the peak before the global financial crisis, like the right, the worst, yeah, the worst recession we've seen, you know, in 100 years at that time, then if you invested every dollar you had right at the peak before everything went horribly wrong, you would be very sad for a couple of years!

But still, it's only six years until the market was exactly back to where it was pre-GFC, which is a long time, but you know, it's six years! That time passes!

I'm sure probably people remember where they were six years ago and people say, “Wow! That doesn't seem like very long ago!”

So I think that, yeah, it's not— especially if you are just invested in the market then, it's not panic stations if you do lose money on paper straight away!

But um, yeah, exactly!

Um, I guess now, so that's kind of what we should expect financially. Is there anything okay? So someone's logged onto their brokerage account, very excited, and they've placed their first trade! Maybe it's on an ETF that tracks the market, maybe it's in Tesla, maybe it's something else! What should they expect emotionally?

Because I feel like this is something that investors don't quite do well! Obviously, they don't realize because you don't feel the emotion until you actually push the button, right?

So what do you feel like they should expect emotionally once they've made their first investment?

It's, uh, it's like the world of like that's a whole other world that like, you know, something I always bring up too and you hit on it is that it's like people don't prepare themselves for the emotional side of investing.

And, uh, to a large extent, it's to our detriment that we don't prepare ourselves because a lot of the time, um, the human brain just isn't like that well structured to deal with investment stress and investment success and things like that!

Yeah! And what I think too, like especially with your first investments, uh, one thing I see a lot for example is, uh, kind of overconfidence and those kind of biases that come with that as well as confirmation bias!

Uh, so—and it's something that, you know, to give an example, this is something that I dealt with too when I started was, you know, I came up with a recommendation and then I focused on all the reports and talked about how good of a company that one position is and that's just an example of confirmation bias!

And it's because you've made the decision of, you know, “I'm buying this thing! This is my idea!”

Uh, I expect this company to do well, you kind of subconsciously start gravitating towards things that make you feel better about that decision!

So you'd find those reports that say, “You know, this is a good company!” Well, you might put less weight on criticisms and things like that about that company!

Yeah, and overconfidence is kind of in the same boat where I think, uh, especially if you do well in the first year, uh, people might become overconfident about their position! Thinking, “Oh, well I picked a position and it went up 60%! Like, I'm a genius!”

Which, yeah!

Yeah, I think the moment you start getting too confident, you've kind of lost the game!

Because a big part of investing is trying to stay objective and trying not to be emotionally attached to your positions which is real hard!

I think a lot of people don't realize how difficult or how frequently you become attached to what you've bought!

And, uh, I think that's why sometimes people, people get especially online, very defensive about certain stocks and stuff like that when they really shouldn't!

Yeah! Now the forums can be a wild place!

That's for damn sure!

Yeah! I try not to go there too often, but every now and then, I'll make a trip! And I think we make very, very good points is that, uh, you will, you will seek out! You know, you, first of all, the first thing to understand is that when you invest, you will definitely feel the investing emotions!

You know, euphoria if your stock goes up! You will feel fear and uncertainty if your stock goes down!

Um, and that's actually a point to touch on, uh, is that, you know, you will feel those! But the best investors in the world are the people that can block those emotions out or keep them very well under control!

Or the best investors are the ones that realize that, “I will feel those emotions, yes! But I shouldn't let them affect my rational thoughts about what I'm going to do with my investments.”

So one thing that I found, and I found with my friends after I've spoken to them about getting into the stock market, whether they're buying just ETFs even, is that they didn't think that they would do it!

But after they bought in, every single day they would be checking their stock portfolio!

I mean, this is even on this is on an ETF that simply tracks the market where the investing objective is to stay invested for decades and just get the market return over a very long time!

It's not like we're checking what Tesla stock is overnight! This is literally the whole market!

Yet they still, and they knew that they were going to be invested for the next 10, 20, 30 years! But the day after they bought those shares, “Have I lost money? Have I gained money?”

So I think there's—I don't know! There's something to be said that you definitely will feel those kind of emotions that you need to, you know, have a loss for sure!

Gain money!

Yeah, yeah! I think, and that's such a killer too! And you're right!

Like I think that's something that beginners will do and, you know, people who have been at it for a while, they know just how bad it is to do that!

Like it's such a terrible practice to watch your stocks on a daily basis! You know, some people like to day trade and stuff like that, but if you're—especially if you're taking kind of a more even value or growth, like fundamentalist stance of, “Okay! I like this company! I think they're going to do well over the long term!” Then it doesn't, like it really should not matter if you've done your research properly!

It should not matter if tomorrow it goes up two hundred percent!

Uh, maybe, okay, that's an exaggeration! I'd probably sell after after a daily 200%!

But if you truly believe in the stock—

Yeah! Let's say 10% or 20%, which is still a lot for a day!

Yeah!

Um, it should not matter because you didn't buy it for the day-to-day price! Weeks, we bought it for that long term period!

So, and but I agree! Like it's something I did as well!

Uh, you know, we watch the position on the daily and, you know, especially when those swings get a bit bigger, uh, I find like you just get more glued to the screen seeing those, you know, because you're seeing money go in and out even though realistically, uh, you know, if you treat it the way it should be, which is to treat it like a business!

Like the idea of you put your money into a business and you're not buying and selling for the price of the business, you're buying and selling for the value of the business!

Uh, the value of the business is probably not fluctuating on a day-to-day basis!

Um, I know, uh, there's a famous quote or a bit from Warren Buffet about farmland for example!

Yeah! You know, seeing farmland crash in price, well, you know, if you know how much you can yield in terms of crop from that farmland, it doesn't really matter!

Like if the price is down because you know what the value is!

Um, so I actually think that being a fundamental investor, doing your research and understanding the company, uh, versus something like a technical or quantitative to some degree, uh, but I think that knowing the company and knowing how things work, um, it kind of gives you a bit more confidence to withstand that urge to sell if you see the stock decline for example because you just, you have that confidence!

Yeah, you know, it's second nature!

Um, I have a co-worker who deals directly with clients and it's something, you know, whenever you have a client come forward, it's an easy conversation!

It really is because he'll say, “Okay! Like you know this company, right?” They'll say, “Yes.” It's, “Okay! Like do you think this company will be around in 10 years?”

“Well, yes.” It's like, “Okay, so why are you concerned about, you know, the five percent drop or whatever it is?”

Um, and it's something that, you know, and then things will recover and they'll be happy because they held through it!

Yeah, I agree!

I would summarize that with the quote, um, what's the quote is that when you're investing remember you're not buying a stock, you're buying a business and I think if you can—that's basically exactly what you were just talking about!

If you can focus on buying businesses, if you are just active investing, if you're passive investing then you're just buying the collection of businesses that make up the market!

But even if you're an active investor, if you focus in, do your research and you consider, “No! No, I'm not buying a stock that goes up today and goes down tomorrow! I'm buying a business that over the next 10 years is going to gradually, as per my research, is likely to increase its cash flows year after year,” which is good for me because I, you know, I'm the investor! I am the owner of that business, at least in part!

Um, then that's the way I feel like that's the best way possible if you're someone that's new to investing to try and start to detach yourself from the emotional aspect of every day goes up and down and up and down, Mr. Market goes crazy!

It's just—I totally agree!

Yeah, I think it's, it's the mindset of—of you know how you and it's reality, right?

Like when you think about it, like sure yes, the stock is increasing or decreasing in price, but at its core investing, like if you think of like when stock investing started, I think the East India Company is technically the first example!

But, um, when you think about that, it's like truly it's just people putting their money, funding the business and then getting to share the profits!

You know, that's the core of this business, um, and I think, you know, I think a lot of people, it's just something that, you know, that they don't think that when they, when they at least start!

And that's part of the reason too, and I keep touching on it why I'm a little—I always say like if you want to pick stocks yourself you need to do the work!

Um, you know, some people will tell you that investing is easy! In some ways, maybe, but I think you've— you've got to know the research! You've got to do the research!

And you, because when something happens that you didn't expect or whatever, you've got to have a reason as to why you missed it, if that makes sense!

Like if, let's say a company, uh, like let's say Chinese operations didn't do well and you didn't know they had Chinese operations, I think that's a pretty red flag, pretty big red flag that that's something you should have known about!

So I'm pretty critical about that stuff, and that's why I'm always cautious about saying whether people should invest themselves or the professional! But if you have the passion, um, it's just about, you know, it's practice, right? It's practice makes it perfect and keeping at it!

Yeah!

And that could lead us full circle to everything we've been talking about! It's totally, you know, you don't have to pick individual stocks! You can just be that passive investor!

You know, if you're picking individual stocks, don't rush with it! You know, take your time! Make sure you go deep!

Try and understand as much as you can! Recognize always at some point that, you know, I've probably gotten something wrong, especially if you're new and you're trying to pick individual stocks!

Just have that opinion! Don't let—don't convince yourself that you know everything about stock!

Literally go in saying, “I know that I've probably made some mistakes,” and then try to find what that mistake is!

But yeah, that's actually a great point to clarify because yeah, I don't want to sound like you need to be omnipotent, I think is the term!

Like you don't need to like know everything!

Right? You do need to know the basics!

Like you should know where the company makes their money from, what their business lines are, their debt, and things like that!

So—but you hit on a good point, which is that, you know, and this is actually a point that people like Warren Buffett and a lot of prominent investors have kind of hit on, is you know you also do need to have a process for quickly evaluating stuff!

And I forget what the term is but there's a term for like doing too much research!

Uh, data paralysis or something like that?

Yeah! Probably analysis paralysis!

So yeah, that's it! That's it!

So—but the idea of like, you know, and this is something I struggled with a lot at my job especially when I started was I wanted to know everything!

Um, it got to the point where I was coming forward to my boss, uh, he would give me a position to look at and I would research it, and I would come for it and I would say, “These are all the irregularities I found in their accounting statements and these are things that I'm really concerned about!”

And, you know, it's kind of funny because at the end of the day that stock ended up doing well!

And it's like, “Well, what the hell? Like, I did my research! I found what I thought were issues!”

But it's, uh, it's the idea that like, you know, you can do all the research in the world and stuff might not turn out the way you expected!

Um, and I think a lot of great investors have just found what's important to look for!

Um, which you just, you find that out through the practice and doing it over time! Um, and that's something I'm still learning because I still do a bit more than I should on some positions and sometimes I get that analysis paralysis where, yeah, you know, I'm getting on into the nitty-gritty and, you know, worrying about the dollar off on their inventory from last year or something!

Um, no, I agree because, uh, that's one thing that I find because I kind of talk about the Warren Buffett style investing strategy which is kind of, you know, understand the business and then, you know, go find the competitive advantage and then make sure the management team's running with skill and integrity and then doing your valuation to making sure you're buying at a, you know, discount to interesting value!

And then within those four key steps, there are a million, you know, subsets! You know, of joining the mode is checking that, you know, you're getting the growth out, the consistent growth in these key metrics and, you know, the management team is making sure that they're, you know, controlling their debts and the return on investor capital and blah blah blah!

And within all that, you end up with this long kind of checklist that you feel as though you have to tick every single box!

Then I get a lot of comments which is like, “Hey, you know, this stock is really close except it doesn't tick every single box!”

And I think that's what you're saying! That you definitely do need to, you know, the more research you do, the better informed you are!

But you're right! There are these key fundamental things! Like what you're saying, you know, how much debt do they have? Do you know how they generate their income or their different business segments?

Do you understand how well the management team is reinvesting back into their own business? Blah blah blah!

What you have to be able to tick those key things!

But you're right! You could find something on the 179th page of their annual report which is just—raises one little question mark!

And you might get into analysis paralysis!

But I think there is a balance! Ultimately, you want to be as informed as possible! But at the same time, you don't want to say no to—because I mean, if you wanted to tick every single box, you'd probably never say yes to anything ever!

Yeah, exactly! And I, you make a good point like it's a balancing act, right? You're not—there's no such thing as a perfect stock!

You know, there's—there's no stock out there with the perfect amount of debt, the perfect profitability, and the valuation like is great!

Like it just doesn't exist!

So it's all about, you know, you take in the multitude of the factors and, uh, you weight them!

You know, “Okay, sure, this company is cheap but its debt is like pretty high!”

Or, or conversely you might say, “Okay, well this debt is a little high, but they have the cash flows to manage it! They have assets that can be easily liquidated to meet that and their earnings are recovering or like whatever the scenario is.”

Like it's all about, uh, the pros and cons of the situation!

Yeah! Um, and on the point of the checklist, I think that I think his name is Guy Spear or Guy?

Yep!

Yeah! That's him! I read a book from him, uh, Education of a Value Investor, which is a great book!

Um, and just like an easy read! Like there's not very many investigations that are just like casual to read this one was like kind of enjoyable!

Like it's just him kind of shooting the— basically and talking about!

Yeah! So it was enjoyable! But I think it's this, that book where I'm pretty sure it was him talking about the idea of making your checklist!

Um, and you might think of a checklist as being like, um, you know, their detail is this ratio or whatever!

Yeah! But his checklist was like very qualitative!

Like it was very much like, uh, like I can't think of a specific one, but it would be something along the lines of, you know, is management, uh, reliable?

Or, you know, is there something about management that I see as being a good leadership trait?

Like it's—there's more quality of stuff and he built his own checklist just through experience!

Like as stuff came up, he added to this checklist!

Uh, yeah, I think he said he had something like 50 points, which is quite a lot!

But, uh, you know, there's no—but I think his point was like, you know, don't use my checklist!

Like make your own checklist, and then make it off of your own experience!

Yeah! That's something I actually started practicing myself a while ago is, you know, as—you go through examples of, “Oh, I missed this on this one stock and it bit me in the butt!” Adding that to your checklist!

And I think that will help you keep track of your, you know, when you make a mistake how to address it moving forward!

Yeah! It goes back to the whole idea of when you make your mistake learn from it! You know, build on your past experience!

But, and, and that's something that, you know, like what we've been saying, don't expect at the start that you're going to know everything!

But as you progress, you know, just make sure that you continue to build! Don't, never give up and continue to build on what you learn and all that sort of stuff!

But overall, I think that's where we'll leave it!

I’ve been doing all these collabs and I've been saying I have to cut them off because otherwise I just keep talking!

Yeah! Well, you know, like every time we probably could have filmed our pre-discussion conversation and that could have been the video by itself!

So it's my fault as well!

But it's—I enjoy talking to you! I think I think we have a lot of comments!

Oh definitely! It's always fun to chat about investments! It's good to pick your brain too because you, you obviously do this for a living!

Whereas I make, you know, just silly old YouTube videos for a living!

So it's really good and get these little morsels, these nuggets of information, uh, that are very valuable! So thank you very much.

Ah, no problem! It's my pleasure!

And, uh, and guys make sure you definitely check out Richard's channel as well, The Plain Bagel!

I'm sure you've seen it, you've got so much content and your content—

Yeah, there he is! There he is with the mug merch!

New merch! plainbagel.shop or whatever!

Yeah! Some, I—I actually don't know, Mike! I can't even plug it! I don't—I don't know what that is!

You can't even remember!

Go over to Richard's channel, check out his mugs! He would greatly appreciate it!

You should start a bagel store! That would be great!

I've never made a bagel in my life!

Oh my gosh, man! That's controversial! We've just heard the most controversial thing ever!

Maybe cut that out!

Thanks! Thanks for your time, man! I really appreciate it! Hopefully that was really, uh, valuable for you guys!

And as I've been saying, definitely check out Richard's channel! You'll learn a heap about investing!

So I appreciate your time, Richard, and I'm sure I'll talk to you soon!

Likewise! Cheers, man!

[Music] [Applause] [Music] [Applause] [Music] [Applause] You!