“I can describe how a business makes money in a simple sentence. If you can’t, you should not invest in it.” – Phil Town
This week on InvestED, Phil and Danielle continue their discussion on checklists diving into the letter “U” of their acronym for checklists, “RULES”. The “U” in “RULES” represents the importance of understanding the businesses you are investing in and being able to explain everything about the company in a simple sentence.
Phil stresses you should be able to know how the business makes money, how their top three competitors make money, what problem the business solves, why they fail, the key performance indicators that industry follows and so much more.
If you can’t answer all of these questions discussed in a simple sentence, Phil expresses that it’s too hard to understand, and you should not invest in the business.
Want to learn more about creating a checklist to understand businesses before you invest? Join us on the podcast today!
Show Notes:
- A Random Walk Down Wall Street by Burton G. Malkiel
- Invested by Phil and Danielle Town
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On the InvestED podcast, Phil and his daughter Danielle shine a light on the successful investing strategies that gurus like Warren Buffett have used for 80 years. Listen in for a great stock market education on basics, learn how to invest on your own, and follow along with real-time examples and investing tips from week to week.