|Back in March, I’ve started been reading several books on how to find great businesses (stocks) to acquire. The recent crash piqued my interest, and I’ve started learning everything I possibly could about how to find great stocks to acquire.
You see, I believe that it’s possible to become a great stock market investor. I believe that it’s actually possible to beat the market. Yes, I know financial planners tell us that it’s not possible to beat the market.
Ever wonder why they tell us this?
If someone else can consistently beat the market, then it’s certainly possible for you and I to beat the market.
“You can’t beat the market” is a limitation we shouldn’t accept.
One common theme from every book I’ve recently read is that it’s not easy to find great stocks. It takes a massive amount of time and research to find undervalued businesses (stocks). It’s even harder for someone who doesn’t have much experience valuing businesses.
Oddly enough, this same challenge flows into real estate, too.
It’s impossible to find the best deals sitting at home on your couch. You’ve got to get out there and walk through a lot of properties.
A friend recently asked if I would partner with him on his first investment property. I agreed with one condition… he had to find a good deal for us to buy.
Well, here’s a text I got from him after he had been looking for a good deal for several weeks:
“Mike, are finding homes for sale and deals this challenging?”
The reality is he had found several great deals before sending this text; however, he didn’t have the experience to know they were good deals.
The only way you get the experience to “see” good deals is to invest a lot of time searching for great deals. Each property you look at helps you “see” more clearly.
The only way I’ll become a better stock market investor is to invest a lot of time searching for great stocks. Every business I study helps me “see” more clearly.
You’ve probably heard that Warren Buffett advises average* people to simply invest in low-cost total stock market index funds. His advice is to just buy the market and accept average returns.
Why does Buffett give this advice?
Because he knows average people won’t invest the time required to find the best undervalued businesses.
When asked how he could achieve 50% returns a year with small sums, Warren Buffet said, “You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map – way off the map.”
- Average people won’t spend hours searching for great companies that are off the map.
- Average people will not read the financial statements of hundreds of businesses.
- Average people won’t go walk through hundreds of homes.
When I first started investing in mobile homes, I spent every Sunday afternoon driving from mobile home park to mobile home park. I walked through every mobile home that was for sale and after a few months finally began “seeing” great deals.
Average people can’t be bothered by all of this searching.
They ain’t got no time for that. 🙁
Today, I can tell if a single family home or mobile home is a great deal without going to see them, and this is because I’ve invested the time necessary to be able to “see” great deals.
Between Vince & I, we’ve probably walked through over 250 properties here in Windsor-Essex County over the last 10 years. We can spot a great deal without leaving home.
It’s easy for us because we’ve invested massive amounts of time searching for great deals. We’ve studied hundreds of investment properties. If you were to read Buffett’s biography, “The Snowball,” you’ll see that he spent every evening in his home office reading annual reports. He spent a massive amount of time searching for the best businesses to acquire.
Today, he can “see” great deals very quickly.
Everyone wants what Buffett has; however, nobody is willing to do what Buffett did.
If you want to beat the market (real estate or stock market), you have two choices:
1. Invest the time necessary to learn to be able to “see” great deals. This time investment will not be easy because it will feel unproductive. You’ll quickly find yourself saying, “This is a complete waste of time.” You’ve got to cancel this thinking out and continue with your search.
2. Hire someone to help you who has already invested massive amounts of time studying great businesses and great real estate investments. When you hire this person, you instantly benefit from their years of experience. This is why so many people just buy shares of Berkshire Hathaway. They instantly benefit from every hour Buffett has invested searching for great businesses during his 90 years.
If you’re not willing to do either of these two things, just invest in low-cost total stock market index funds. Seriously.
The good news about all of this is that if you’re actually willing to invest the time required to find great deals, you won’t have any competition.
Average people won’t do what you’ve done and they won’t be able to “see” what you see.