Business Pundit

I’ve decided to try out this confessional series to open up a discussion with other investors, both experienced and amateurs. I’ve invested in index funds for years, but it seems like these days, the index fund isn’t quite as infallible as it used to be. So I’m trying out growth investing, buying and holding stock from companies I believe will perform well in the future.

I know next to nothing about this entire process. My hope is that through education, trial and error, and your feedback, I’ll eventually become a smart investor. Because I’m not interested in hiring someone to do the work for me, I have a bit of a learning curve to ascend before reaching my goal.

This series is a confessional because, as an amateur, I know I will commit investment sins, such as emotional and impulsive investing. As you’ll see later in this post, I already have.

The point is to learn from what I do, and hopefully glean advice from you, my readers, in the process.

Here are my investment goals:

1) Make money off of green technology and sustainable energy.
2) Make money investing in a (foreign?) currency.
3) Successfully invest long-term in a metal, such as gold or silver.
4) Avoid investing in companies that support wars or genocide.
5) Become a more knowledgeable investor.
6) Make money over a period of 2-10 years.

I had my first experience with item 1) a month or so ago. This is how my investment “strategy” panned out:

Step 1: While doing some research for Business Pundit, I read the Pickens Plan.

Step 2: I started thinking hard about the need to build a good portfolio that isn’t reliant on domestic index funds.

Step 3: I read the Pickens Plan again. I noted that GE is providing components for Pickens’ upcoming wind farm.

Step 4: In a rush of enthusiasm, I realized GE must be a good bet. It’s an old company with a legendary founder. Pickens is an old man with legendary wealth. There must be some money here, right?

Step 5: I put in an order for GE shares on my trading site. Promised myself not to watch the stock closely until 2009.

Step 6: Watched the stock closely. Grew excited when it gained $1/share.

Lesson: Research!

In hindsight, I realize that I should have looked more closely at the company’s balance sheets, executives, and historic performance, if only to get more educated about who I was investing in. I put my money in based on one piece of news and an emotional hit. From what I know about smart investing, it requires research and knowledge about the company before putting in money.

Through lack of research, I also violated one of my stated principles. GE works with defense and the military, right? That means it supports a war. The company is so large that its defense contracting component wasn’t immediately obvious to me, the newbie. This tells me that stepping back and thinking critically about a company before investing also makes sense, especially if there are certain principles at stake.

My next question, then, is this: What’s the best way to research a company before buying a stock?