Should You Buy That Stock? 4% of Companies Made All the Gains (Explained by a Banker)

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Should You Buy That Stock? Five Questions Before You Do

Before buying any single stock, ask five questions in order and stop at the first honest no. One: is this money you could lose completely — is it in the free hand, not the buffer, floor or engine? Two: can you say why in one plain sentence? Three: what event would prove you wrong? Four: what do you know that the price does not already reflect? Five: if it went to zero tomorrow, would it change your life or your week? The base rate makes the order matter: across all 25,967 US stocks from 1926 to 2016, 57.4% never beat a one-month Treasury bill over their lifetime, the median lifetime return was −2.29%, and the best 4% of companies produced all of the market's net wealth creation. Buying one company is not buying the market; it is looking for a needle, on purpose, with money you can afford to lose.

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