Take The Emotion Out Of Buying Stocks

Emotions have no place in investing. You rely on cold, hard data to make investing decisions. Today we’ll talk about ways to take the emotion out of buying stocks with the founder of Simply Wall Street.

 We interview Al Bentley, wind-surfer, CEO and co-founder of Simply Wall Street, an Australian startup that helps people make better investing decisions by turning complex data into easily understood infographics.

Buy and Hold Wins Again

Confirming yet again the advice that LMM has been giving you from the start, Simply Wall Street does not advocate picking individual stocks but rather the buy and hold strategy.

But because there are people who buy individual stocks, Simply Wall Street wants to give them the best information available in a way that is easy to understand so that they can take the emotion out of buying stocks and make right decisions.

The site does get incredibly detailed on individual stocks even looking at things like CEO compensation, but when you visit, you’ll notice that one piece of information they don’t include shares price. It is part of the analysis, but they don’t want people to rely too much on that one bit of data. People get too hung up on price when deciding what stocks to buy.

DIY Fund

Simply Wall Street wants to allow people to pick individual stocks not so they can sell them off quickly, but so they can essentially build their own fund. Individual stocks shouldn’t make up your entire portfolio but using the information that SWS provides makes it easy to have direct shares as a part of your portfolio.

Investing for the In-Betweeners

There is certainly no shortage of information available to help you pick stocks, but a lot of it is not easily understood by normal people. And what can be easily understood, previous share price, for example, is not a good indicator. You can’t always predict the future by looking at the past.

It’s important to look at certain ratios like P/E and P/S, but you need context to understand what those numbers are indicating. Some investors rely on things like Google Finance for information, but that was built by finance people for finance people.

SWS wanted to create something for the rest of us, the layperson that doesn’t have all the technical knowledge that some finance people assume everyone has. The founders are not finance guys, so they don’t have those ingrained biases.

They were investors though so understood the problems of investors. There are a lot of resources for brand new investors, things like Betterment and Robin Hood, and things for high-end investors but investors that fall between those two categories are under-served.

Special Snow Flakes

SWS uses a system that is meant to analyze stocks that will be held long term. If you really want to nerd out, they open sourced their analysis model on Git Hub so you can have a look for yourself. There are five main components;

Value: Value is based on future cash flow and its price relative to the stock market.

Future: The expected performance in the next 1-3 years, based on estimates from up to 50 analysts.

Past: The earnings performance over the previous five years.

Health: A company’s financial health and their level of debt. This marker is critical to long-term investing.

Income: The current dividend yield, its volatility, and sustainability.

There is another factor that SWS looks at that many investors and advisors overlooks; management. How long has the board been serving, is the CEO grossly overcompensated,

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