In this segment from Industry Focus: Consumer Goods, the cast shares some of their favorite tips for newcomers to the stock market. They encourage beginning investors to carefully consider how they do their company research and how they should approach each potential investment.
A full transcript follows the video.
This podcast was recorded on Feb. 7, 2017.
Gaby Lapera: I actually have one last question for the both of you. If you were to give a beginning investor one piece of advice, what would it be?
Vincent Shen: I'll happily go first. I've been talking about it with this company in terms of diversifying, and I've recently had a lot of conversations with my younger cousin. He's, I think, a sophomore now at Notre Dame, and he has recently gotten super interested in investing, asking me a ton of questions because of my work here at The Motley Fool. Everyone knows that you're supposed to diversify your portfolio, even out some of your risks, invest in different sectors, different kinds of stocks, and just diversify your portfolio the best you can.
I think something else I've been trying to hammer into him is to diversify the sources of your information and how you research companies, learn about them, as well. He would very commonly call me and say, "Hey, I read about this article in Bloomberg, very bullish on a company, do you think I should buy?" And I told him, "Hold your horses, what else do you know? This is based on one person's potential opinion. One analyst's opinion. You should really round out where you're getting your information from. Make sure you know more about the company and what the actual prospects are before you dive in." In that sense, I would say, make sure you're looking at the primary sources, like the financial statements, the press releases, and also getting opinions so you can get the bear case, the bull case, and make a decision, probably, somewhere in between there.
Lapera: And also, for listeners who are college students, that's great advice for any paper that you write. Look for sources that have different opinions from the ones that support your viewpoint. And, make sure you look at the primary sources. I can't tell you how many people never look at them in history papers.
Sean O'Reilly: Actually, my word of advice echoes that a bit. I actually recommend literally writing a bear piece on anything you're interested in buying. Literally, make it your goal to wake up fresh in the morning and write a bear case.
Lapera: That makes a lot of sense to me. That way, you're very familiar with the company's weaknesses.