How Did I Get Started In Investing?

Below is a partial excerpt of an interview I did with Investorstory.co about how did I get started in investing.

To read the full interview you can go here.

I hope you enjoy it.

Jason

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Who are you and what’s your story?

I’m a self-taught value investor who focuses on small and obscure public companies to buy for my investors and subscribers.

I’m the author of the acclaimed value investing education book How To Value Invest, On Float, and as of this writing am finalizing the Second Edition of How To Value Invest.

I’ve run this blog Value Investing Journey for more than eight years and the sites have been named a top 50 value investing blog in the world four times now.

And our two value investing and education sites have been Named Top 15 Value Investing Podcasts In The World.

I also manage investment portfolios for clients.

In the first 8 years of my investment career, I’ve produced investment returns for the portfolios I manage of 21.7% per year on average. This is compared to about 9.9% for the market on average every year during this same period.

You can read a more detailed performance review for 2019 here.

MY UPDATED NOTE – TO READ THE UP-TO-DATE 2020 PERFORMANCE REVIEW AND SEE HOW I EARNED 48.3% RETURNS LAST YEAR CLICK HERE.

I’ve written for several publications and investment newsletters including Seeking Alpha, The Palm Beach Letter, Wyatt Research, Insider Monkey, Guru Focus, and others.

I got started in investing by necessity.

I couldn’t work or go to college after high school due to long-term severe dizziness issues – that I still deal with to this day as I’m about to turn 34.

But I also had a wife who was pregnant with our first child that I needed to be able to provide for at some point.

In high school, we had this class called consumerism and one of the things learned in that class was about stocks.

Because of my physical limitations by default I chose to learn about stocks and investing because it was the only thing I was remotely interested in that I could also do from home.

What do you invest in and why did you start investing?

I invest in mostly small – small, micro, and nano-cap – stocks in the portfolios I manage.

I do this so I can get a legal informational advantage over other investors who either can’t or won’t invest in these small stocks.

What does this mean?

Larger institutional investors sometimes either legally can’t invest in small stocks below a certain size.

Or they won’t because it won’t make a huge difference in their results.

For example, Apple at a $2 trillion market cap investing in stock worth $50 million will do almost nothing for them in the short or long term unless it’s in some kind of massive new trend. So most of the time they won’t invest in these kinds of smaller opportunities.

And because many can’t or won’t invest in these kinds of smaller stocks I can get a legal informational advantage by researching them because fewer people are doing so.

And when I say small… The smallest public stock I’ve invested in had a $12 million market cap when I invested in it. And the smallest stock on my watchlist has a $4 million market cap.

For example, many large companies and institutional investors won’t invest in stocks that have a market cap below $10 billion… This is where so-called Large Cap stocks begin.

Note here though – I tell this to everyone I talk to about investing in these tiny companies… Unless you know what you’re doing you shouldn’t invest in these kinds of stocks.

Even though they are my favorites to invest in – 99% of them are still terrible and can blow up your portfolio real quick if you don’t know how to evaluate stocks and their financials on a deep level.

I’m also transferring my knowledge of value investing and evaluation and valuation to looking at investing in private businesses and commercial real estate as well.

The portfolios I manage are in the six figures range. But I’ve turned down almost $2.5 million in funds that people wanted to invest with me.

Why?

Because they only wanted to invest in stocks a couple of years ago and I haven’t bought a new stock in almost 6 years now due to the sky-high – and still rising – valuations on stocks worldwide.

I won’t bend my strict criteria just to buy something… And I would have felt bad taking those investors capital and just having it sit there and earning fees off them.

I started investing real money almost 11 years ago now and got my ass kicked by Mr. Market.

Within 6 months of investing real money, my portfolio was down 50% because I was only investing based on financial ratios I learned from books and via my online research. And in most cases, I didn’t even know what business the stock was in.

Luckily I’d only started investing with $500. But the 50% loss in 6 months shocked me into learning the craft of investing. It forced me to learn the real ins and outs of investing like reading financial statements thoroughly, learning business models and competitive advantages, valuations, etc.

Without this, I wouldn’t be where I am today.

The biggest lesson from this that I teach all my students… Never rely only on the numbers. This is just a starting point if good. And a disqualifier if bad.

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To read the rest of the lengthy interview click here to go to the article on Investorstory.co.