Know what you own and why you own it. This principle is at the heart of our investment philosophy at Solidarity Wealth. Understanding the ins and outs of your investments is crucial, especially during economic turbulence. It’s about owning a piece of a business you believe in, at a price you’re confident in.
Transcript
The Cornerstone of Solidarity Wealth: Know What You Own and Why You Own It
One of the core tenets you’ll hear us espouse at Solidarity Wealth is know what you own and why you own it. This concept and idea is often attributed to famed Fidelity portfolio manager Peter Lynch but is utilized in a variety of forms through what we deem as the most successful investors. Today I wanted to cover a few of the reasons why we view this as a cornerstone of our investment process.
The Difference Between Investing and Trading
Believe it or not, there are many so-called investors that don’t actually know the ins and outs of the companies that they invest in. In fact, taking a step back even further, many of them don’t actually invest; rather, they trade. When you buy shares of stock in a business, you are doing just that—owning an actual piece of that business. This should be done with the understanding that if you were to buy the entire business, would you:
A. Feel comfortable owning that particular business?
B. Feel good about the price that you paid for that business?
Applying Business Ownership Principles to Stock Investing
Many times, these concepts are thought about if you were approached by a friend in a business venture they wanted you to invest in. You’d scrutinize the offering, check the financials, and understand if they’re profitable, what the path towards profitability is, what their distribution channels are, and what’s the total addressable market for the particular business. We’re no different—this is what we spend a good portion of our time on in the investment committee at Solidarity Wealth.
How Solidarity Wealth Identifies the Best Businesses to Invest In
Understanding the best businesses out there, their competitive advantages in the marketplace, and knowing everything that we can about the business. Frankly, this is why you hire us: to understand the best businesses to invest in. In my experience, knowing what you own and why you own it is at the forefront of importance when there is calamity in the economy and markets in general.
Why Great Businesses Thrive After Economic Slowdowns
The best businesses aren’t immune from economic slowdown—in fact, nothing is—but the best businesses rebound. At times of difficulty, we rejoice in opportunities like that because we’re able to buy those businesses at a discounted price.
How Understanding Your Investments Reduces Stress and Builds Wealth
When you understand the businesses that you’ve invested in and know what makes them work, along with their advantages and disadvantages, it helps make you a better investor. This can help grow your wealth over time and generally worry less about your portfolio.