Step 2: Target The Stupidly Simple.

 
  "Donut Be Sophisticated"

"Donut Be Sophisticated"

 
If you can’t explain to a ten-year-old in two minutes or less why you own a stock, you shouldn’t own it... I made ten times my money in Dunkin Donuts.
— Peter Lynch (who turned $18 million into $14 billion), in One Up On Wall Street
 

These are the companies (and stocks) that I've done best with:

  1. Nintendo (NTDOY)
  2. Netflix (NFLX)
  3. Google (GOOG)
  4. Apple (AAPL)
  5. Amazon (AMZN)
  6. Zipcar (ZIP)
  7. Boston Beer (SAM)
  8. SodaStream (SODA)
  9. GrubHub (GRUB)
  10. PayPal (PYPL)

"Grouper Mario"

These are the companies (and stocks) that I've done worst with:

  1. North Peace Energy (NPE.CA)
  2. A123 Systems (AONE)

"Downward Facing Cod"

Do you see a pattern here?

In 2007, at my dad's strong urging, I took $20,000 out of Nintendo (which was simple) and put it into North Peace Energy Corp (which was not); then watched Nintendo double in six months, while North Peace lost 95% of its value and then went out of business.

That loss was not on my dad. It was on me for trusting his instincts over my instincts, and for pursuing sophistication over simplicity.

In 2010, at my friend's strong urging, I took $12,000 out of Netflix (which was simple) and put it into A123 Systems (which was not); then watched Netflix rise more than 1,200% (turning every $12,000 into more than $150,000), while A123 lost half its value and then went out of business.

That loss was not on my friend. It was on me for trusting his instincts over my instincts, and for pursuing sophistication over simplicity.

(In both cases, "sophistication" meant me not understanding how these companies made money.)

"SimpliciWii"

So you can believe me when I tell you:

  • You are smart enough to do this. Trust YOUR instincts. No one else's.

  • Invest in the stupidly simple. What you love and touch daily. And use as often as your teeth.

  • Don't look for stock picks from professionals. Look for addictions in your mouth. Or predictions in your head.