Investing in stocks is a lot like gardening

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Common stock investing works very much like a garden. Choosing the most attractive securities is like shopping for seeds, saplings and the piece of ground you will farm. We prefer our eight criteria for common stock selection. They are a mixture of qualitative characteristics (consistent profitability, copious free cash flow, strong balance sheet, etc.) and bargain finding mechanisms (cheap in relation to the last five years and strong insider ownership, preferably with recent purchases).

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Almost all the recorded history of stock market participation shows that investors make every attempt to avoid the bear. The psychological pain of losing is much more powerful than the joy of making money. Many investors live in fear that the next decline will ruin their financial plans. For this reason, entire industries have been created to eliminate the volatility and the variability of stock price performance. The complexity of “smoothing” stock market returns and the expense associated with doing so cripples the long-term returns historically offered by diversified common stock ownership.

Read more: https://smeadcap.com/smead-strategies/smead-blog/entries/2015/03/31/common-stocks-a-garden-of-wealth-creation/#ixzz3WDgjbmcN