How to Invest in Stocks

Understand what a share actually is

A share is a fractional claim on a business's future cash flows. Everything else the ticker, the chart, the chatter is downstream of that.

That framing changes the question from 'will this go up?' to 'what is this business worth, and am I paying less than that?'

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Read the business before the price

Start with revenue growth, operating margin, free cash flow, and the balance sheet. A company funding growth with cash it earns is in a different class from one funding it with debt.

Ask whether the advantage is durable: brand, scale, switching costs, or network effects. A moat is what keeps margins alive for a decade.

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Value it, then wait

Compare the price-to-earnings and free-cash-flow yield against the company's own history and its closest peers, not against the whole market.

Build in a margin of safety. If the estimate is wrong by a third, you should still be fine.

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Size positions so mistakes are survivable

A concentrated portfolio of 15 to 25 businesses you understand beats a scattered list of 60 you do not. But no single holding should be able to ruin the plan.

Add to winners as the thesis proves out; sell when the thesis breaks, not when the price wobbles.

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