Course 104: What Matters and What Doesn't
Investing Means Owning Businesses
In this course
1 Introduction
2 Investing Does Not Equal Trading
3 Investing Means Owning Businesses
4 You Buy Stocks, Not the Market
5 Competitive Positioning Is Most Important
6 The Bottom Line

If the mechanics of actual trading mean little, what does matter? Do charts of stock prices hold the answers? We've said it once, and we'll say it again and again: When you buy stocks, you are buying ownership interests in companies. Stocks are not just pieces of paper to be traded.

So if you are buying businesses, it makes sense to think like a business owner. This means learning how to read financial statements, considering how companies actually make money, spotting trends, and figuring out which businesses have the best competitive positions. It also means coming up with appropriate prices to pay for the businesses you want to buy. Notice that none of this requires lightning-fast reflexes!

You should also buy stocks like you would any other large purchase: with lots of research, care, and the intention to hold as long as it makes sense. Some people will spend an entire weekend driving around to different stores to save $60 on a television, but they put hardly any thought into the thousands of dollars they could create for themselves by purchasing the right stocks (or avoiding the wrong ones). Again, investing is an intellectual exercise, but one that can have a large payoff.

Next: You Buy Stocks, Not the Market >>

Print Lesson |Feedback | Digg! digg it
Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores.
Copyright 2015 Morningstar, Inc. All rights reserved. Please read our Privacy Policy.
If you have questions or comments please contact Morningstar.