Know What You Own

Most investors buy things they don’t understand. They are enamored by the sizzle and forget the steak. They are like a man who buys a tractor but has no idea how to farm.

Peter Lynch, a man who liked things he could actually see and touch, gave us the Two-Minute Drill. It is the only way to avoid Whisper Stocks and other high-tech hallucinations. If you can’t explain it, you haven’t truly used the principle of Investing in What You Know.

The Crayon Test

If you can’t explain why you own a stock to a twelve-year-old in two minutes or less—and if the twelve-year-old doesn’t get bored and walk away—you probably shouldn’t own it.

You should be able to say: “This company sells shoes. People like the shoes. They are opening five new stores a month. They have no debt. The earnings are growing faster than the price.”

If your explanation involves words like “synergy,” “paradigm shift,” or “proprietary blockchain ecosystem,” you are probably trying to convince yourself of a lie. You are a man who has bought a tractor and is now trying to use it to fly to the moon.

The Smartin Simplicity: COST

Costco is easy to explain. They sell giant jars of mayonnaise. People pay a fee just to enter the building. They make more money from the fees than the mayo.

• Smartin Roast: If we ran the Smartin App today, it would look at that business model. It’s high quality, but the PEG ratio might be a bit high because everyone else knows it’s a good business too. It is a “Stalwart” that everyone is treating like a “Fast Grower.”

If you can’t explain it, don’t buy it.

👉 Download Smartin: Quick Stock Ratings on the App Store today