Investors can learn the tools of Foolishness from a variety of sources. Two of my favorite introductions to the principles of sound investing are One Up on Wall Street by Peter Lynch and The Motley Fool Investment Guide by David and Tom Gardner. But when it comes to smart investing, experience itself may be your best teacher.
It would be nice if lacing up your Air Jordans and picking up a ball were all it took to master the game of basketball. Unfortunately for us, it takes practice to learn the game, and even more practice to play well. Investing isn't much different.
Without question, the School of Hard Stocks has been one of my most influential investing instructors. From JDS Uniphase (NASDAQ:JDSU), Starbucks (NASDAQ:SBUX), eBay (NASDAQ:EBAY), McDonald's (NYSE:MCD), and a host of others, I've learned some valuable lessons.
Yahoo! (NASDAQ:YHOO), for example, reinforced the importance of questioning the market's irrational exuberance when it hyperinflates a company's worth. Starbucks and Electronic Arts (NASDAQ:ERTS) showed me the importance of buying and holding -- letting your winners keep on scoring exceptional returns for your portfolio. Would you pull Michael Jordan off the court with the game on the line? Of course not -- nor should you pull your best stocks out of your own lineup.
JDS Uniphase and Ariba (NASDAQ:ARBA), a provider of business software, were my final exams in the School of Hard Stocks. Both taught me the critical importance of investing in enterprises that are producing cash, not burning it. These two early investing experiences also moved me to create an investing wish list. Much like kids make lists for Santa at Christmastime, you can make your own Top 25 list of the stocks you would most like to own and the prices at which you'd like to buy them.
Consider ranking your favorite small-cap stocks from our Motley Fool Hidden Gems selections, setting a price for each, and then waiting patiently for some of your wishes to come true. If you do so, you may be lucky enough to skip over the some of the more painful chapters in the School of Hard Stocks' textbooks -- the ones I trudged through several times.
This Thursday, Motley Fool Hidden Gems will release its invaluable six-month review. Sign up for a free 30-day trial today to get your copy.
eBay and Electronic Arts are Motley Fool Stock Advisor picks.
Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.
