The Secret to Successful Investing: Good vs Bad Stocks

You've probably heard the advice,

Invest in good stocks, monitor them closely, and hold for years.

Sounds simple, right?

But what if we flip this advice and say,

Avoid investing in bad stocks. Whatever remains is good.

Doesn't sound as exciting, does it?

But believe it or not, both approaches are the same, and one of them is easier. Can you guess which one?

Most investors are completely focused on finding the best stocks to invest in.

They believe that among the many good options, they must find the best.

Practically, this is quite hard to achieve.

In fact, the thumb rule is

As long as you can be well above average, you will be all right.

You know, the key point is that it’s very difficult to choose between good and good, but it’s easy to choose between good and bad.

Because you need to look at dozens of factors to decide whether a company is worth investing in, but even one or two strong negative points are enough to decide that you must not invest in the company, no matter how positive the rest of the factors are.

So, what's the takeaway here?

Start by identifying and eliminating the bad stocks. This alone can put you above the average investor or the general market. Once you've weeded out the bad, you're left with the good. And even if you make a mistake in choosing between good stocks, it won't have a disastrous impact on your investment.

You might do well or a bit better, but you’ll be fine. You’ll meet your financial goals. The job will get done.

Remember, investing is not just about finding the best stocks, but also about avoiding the worst.

So, start eliminating the bad, and let the good shine through!