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109 - How much time should you research a stock before buying?
Mental Models discussed in this podcast: The Pareto Principle (80/20 Rule) Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.  Follow me on Twitter and YouTube Twitter Handle: @TreyHenninger YouTube Channel: DIY Investing Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron. Show Outline The full show notes for this episode are available at https://www.diyinvesting.org/Episode109 How much time should you spend researching stocks? It Varies As long as it takes to answer your questions 80/20 Pareto Principle 10 hours - I don't think I've ever spent more than 10 hours before buying a stock I like.  How to prioritize your research time First ten minutes: Is it cheap? If you can't answer in ten minutes, the answer is NO. Next 1-2 hours: Is it good? If you can't answer in 2 hours, the answer is NO. Next 8 hours: Is it safe? If you can't answer in 8 hours, the answer is NO. The efficiency of research time is important: The most important: Safe > Good > Cheap The easiest to verify: Cheap > Good > Safe All you need to know in ten hours: Is this my best current idea? Is it better than something I currently own? You need to answer "YES!" to both.  If you hold cash, then the second question becomes: Is it better than cash?   Summary: The process of researching stocks requires a significant amount of time investment. You should optimize the time you spend researching by focusing on three questions: Cheap? Good? Safe? You should be able to answer in ten hours or less. My personal process focuses on two additional questions: Is this my best current stock idea? Is this company better than something I currently own? If you can answer both questions affirmatively, you should probably buy the stock.
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