Blog | Choose Stocks Wisely

Faith, Money, and Investing in Stocks

I’m a follower of Jesus Christ. It seems to me that money can sometimes be an uncomfortable topic of discussion for those of us who profess to believe in Christ. Many are familiar with the Bible passage (I Timothy 6: 10) where the apostle Paul says that the love of money is the root of all evil. Obviously, talking about money does not equate loving it. In fact, Christians must be willing to have frank discussions about money since we are regarded as God’s stewards in the Bible and, as God’s stewards, it is required that we be found faithful (I Corinthians 4: 2). Financial stewardship is an important area of Christian stewardship.

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October 13th, 2013|Buying, Christian stewardship, money, Stock|2 Comments

Relaxing the P/E

On occasion, I will write a post that is especially directed to readers of my book. This is one of those posts.

My book teaches how to screen for potential stock purchase candidates from the universe of publicly traded companies and then how to analyze the stock purchase candidates further for quality and a low buying price.

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October 7th, 2013|P/E ratio, Stock, stock filters|0 Comments

Buy Low OR Sell High

Yes, I know. It’s “buy low AND sell high,” not “buy low OR sell high.” However, I want to make a case in this post and the next that knowing how to buy quality stocks at bargain (low) prices is much more important than knowing how to sell stocks at high prices.

Intuitively, if I know how to buy low but not how to sell high, I face a low level of risk of loss since I’m buying at a base level from which the stock price is unlikely to diminish significantly, even if the company does not perform as well as I would like for a spell. On the other hand, if I know how to sell high but not how to buy low, I’m assuming significant risk since I’m dependent on things going well for the company such that I have opportunity to realize the high selling price. Further, since I don’t know where “low” is, I’m vulnerable to finding that out the hard way if things don’t go so well for the company involved. My personal record of success reveals that if you know how to buy quality stocks at low prices, you will likely exceed normal market returns regardless of how seldom you manage to sell near high prices achieved by the stocks you buy.

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October 2nd, 2013|Balance Sheet, Buying, Risk, Stock|0 Comments

Think of Equity Being Like Your Checking Account Balance

Equity is a type of account found on the balance sheet and equity belongs to common stockholders when the business is in the corporate form. When something beneficial, financially speaking, happens to the company, the amount (balance) of the equity account goes up. When something negative, financially speaking, happens to the company, the equity balance goes down.

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September 18th, 2013|Balance Sheet, Equity, Stock|0 Comments

Risk is the Downside

When purchasing common stocks, the name of the game is risk avoidance. If you avoid losing money, you stand to do well in the stock market. You buy a stock to achieve a return, but achieving a return depends on buying quality stocks when they are trading at bargain prices. That is, you make a good stock investment when you buy stock in a solid company that is underpriced. When you do this, you have minimized risk by minimizing your potential loss. If you want to achieve good returns consistently, don’t focus your attention on the possible return; focus on minimizing your risk of loss when you buy.

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August 12th, 2013|Balance Sheet, Buying, Equity, Risk, Stock|0 Comments

Buying Common Stock is Buying Company Equity

We often hear the question, “how much equity do you have in your home?” The term “equity” refers to ownership. If there is a mortgage on the home, the total equity is shared by the borrower and by the lender. That is, the borrower has an ownership stake and so does the lending institution.

When you buy a share of a company’s common stock, you are buying a share of equity because you are purchasing an ownership interest in that company. How much is the equity stake worth when you buy? That is, how much is the share of common stock really worth when you buy it? You must be able to adequately answer that question before you buy; otherwise, you may overpay for the stock. Overpaying can lead to painful losses. Conversely, knowing the approximate worth of a stock and buying it for less than that worth can result in healthy investment gains.

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August 11th, 2013|Balance Sheet, Buying, Equity, Stock|0 Comments