The Investing for Beginners Podcast - Your Path to Financial Freedom Q&A: Fixing a Bad Portfolio and Reacting to AI's Disruption
May 22, 2025
Listeners dive into strategies for handling losing stocks and whether to sell or average down. They explore the importance of understanding underlying businesses over emotional decision-making. A discussion on personalized free cash flow estimates reveals various approaches for different industries. Insights are shared on managing a substantial inheritance and crafting a strong investment portfolio. Finally, a thought-provoking dialogue examines AI's disruptive potential in Google's search business and the evolving landscape of investment opportunities.
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Think Like a Business Owner
- Act like a long-term business owner when deciding to sell or hold stocks that have lost value.
- Evaluate whether the business fundamentals have changed rather than focusing solely on recovering losses.
Adjust Free Cash Flow Wisely
- Adjust free cash flow estimates case-by-case, especially considering stock-based compensation and acquisitions.
- Normalize unusual cash flow impacts to better reflect sustainable shareholder cash flows.
Prudent Portfolio Downsizing
- Rank your stocks by quality and trim the lowest-quality holdings when reducing portfolio size.
- Take your time to gradually improve your portfolio and learn as you go, especially after an inheritance.