How to Invest: Meaning and the 3 Circles
How to invest meaning and the three circles by Phil town of rule one investing dot com. Investing for beginners. Circle of competence. The most important thing. I can tell you about becoming a great investor is to focus on your circle of competence. What that means is that area of the world that you live in that, you actually know quite a lot about for most beginning investors. We sort of think we don't know anything about anything I know I certainly felt like that when I started off. But in fact, my teacher told me to start by looking for meaning in each investment. Invest in a business that means something to you. Try to buy businesses that really mean something to you to start with, I have to find out more about me. What actually means something to me what do I actually know something about To figure it out I, want to look at the three circles exercise. Choose Industries you're interested in. What we're doing is loading in industries where we already have a lot of knowledge I'm pretty good at computer software and services as well as Internet hardware, real estate, stuff, clothing, personal items, automotive, and getting those off of this list. If I see things that I made really already know quite a lot about like, let's say leisure and media recreation entertainment hobbies. I just read the description and you can see some of the stocks are in. That category, for example, storm and Ruger and company they make guns and I like guns. So I'm adding Leisure and media to my list. Now, we'll see that leisure and media is on my list and I'm on to the next part of the three circles, which is talent circle to add to that. So you go through each of these circles and simply save and continue by putting on items that you know you already know a lot about. How to choose a business? That is right for you? The first one is passions. The second one is talent. What are you really talented at? What do you know a lot about what can you be world class at and the third one is where you spend your money. So you start to look for things that are in all three of these save them and the program will go out and find industries that matched the talent passions and money circles that you already put up. Now you can see this has come up with a pretty darn good list so it started. OFF THAT I wasn't sure I'd have any companies I might know anything about and it turns out. There are many many companies that I know a lot about for example, let's go over and look at recreational vehicles that sounds like something I might know a bit about what I get is a list of all the companies that are in the recreational vehicle industry group. You can see it's got Harley Davidson and they make motorcycles polaris makes no machines and four wheelers Arctic cat make snow machines winnebago makes those big Winnebago's right. I already know something about these companies. These are companies that I have some connection with in my life. Why we care about understanding a business. So. Why do we care about understanding the business? Well, in one if we buy one share of a company, it's as if we bought the entire company when I buy one share of something I, feel like I own the entire business. Investing, tip the my rule. One Way to think about this is that imagine that my uncle gave me a billion dollars to go out and buy a company with. But the rules were that only get to by one company and that company would be the only way I, make money the whole rest of my life, and if that company went under I would have to live on welfare. So I by every company that I look at it as if it's the only company, my uncle will let me by this is a great rule. You should think about it, I, call it my uncle rule. Investing tip the ten ten rule. I also have what's called a ten ten rule. It says, I'm not going to own a company for ten minutes unless I'm willing to own it for ten years. So if I'm going to buy a company and be willing to own it for ten years, he'd better be something I like and matches my value systems I'm passionate about it I. Love It. I'm talented at it and I spend my money in it. Conclusion. Those are the things that make me connect to my investments and the more I connect with my investments the more I own it as if I owned the whole business, the more I understand the meaning of the business, the better investor I'm going to be.