Chapter 1: The Risks of Ignorance in Investing

Investing in stocks without adequate knowledge can lead to poor decisions. Peter Lynch, a renowned investor, famously stated that the most detrimental choice is to invest in companies you don't understand. Despite this, many individuals still engage in stock trading out of sheer ignorance, a practice that remains alarmingly common.

"The worst thing you can do is invest in companies you know nothing about. Unfortunately, buying stocks on ignorance is still a popular American pastime."

—Peter Lynch | Net worth: $450 million

Every stock represents a real company that generates revenue through products or services. Recently, I came across a YouTube discussion where a presenter urged viewers to sell shares of Meta Platforms, Inc. (formerly Facebook) and instead invest in Advanced Micro Devices, Inc. (AMD). It was striking how well the speaker articulated the strengths and future prospects of Meta, yet offered minimal insight into AMD. The underlying rationale for investing in AMD seemed primarily based on its rising stock price and its popularity among institutional investors.

"The dumbest reason in the world to buy a stock is because it's going up."

—Warren Buffett | Net worth: $113.8 billion

A stock can be seen as a certificate that confirms your ownership in a company. At various times, potential buyers will offer you money to obtain that certificate. However, it’s critical to focus on the company behind the stock rather than the stock price itself.

Section 1.1: Understanding Company Descriptions

Consider the descriptions of these two companies (available on UP 365) and reflect on which one resonates with you more.

Business Descriptions:

• Meta Platforms, Inc. (FB)
• Advanced Micro Devices, Inc. (AMD)

While some investors may have a deep understanding of AMD's operations and products, I find myself lacking that insight. Those knowledgeable about AMD often build their own PCs and can articulate their preference for AMD's Ryzen PRO line over Intel's offerings. Their comprehension gives them an edge in making informed investment choices.

Subsection 1.1.1: The Meaning of Stock Ownership

Whenever you purchase a stock, you gain partial ownership of that company. As an owner, it's vital to grasp the nature of the company’s products or services. This knowledge empowers you to make informed decisions regarding your investment—whether to buy, sell, or hold. Imagine asking a business owner about their offerings only to hear, "I don't know." It would raise eyebrows, wouldn’t it?

Chapter 2: Assessing Meta's Performance

Despite Meta's recent stock decline and the deluge of negative media coverage, the company’s fundamentals remain robust. Why consider selling?

While past performance doesn’t guarantee future success, if you can filter out the panic-driven narratives and evaluate a company based on its merits, you may avoid being irrationally swayed into selling a quality investment at a low price. In fact, you might even seize the opportunity to buy shares at a discount.

"Successful investors like stocks better when they're going down. When you go to a department store or a supermarket, you like to buy merchandise on sale, but it doesn't work that way in the stock market. In the stock market, people panic when stocks are going down, so they like them less when they should like them more."

—Seth Klarman | Net worth: $1.5 billion

Happy investing!

— Yannic Francis

Thanks for reading!

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Yannic is an MBA student and the Founder of UP 365, a mobile app dedicated to stock market investing. He also hosts a YouTube channel that simplifies investment concepts. When not in class or analyzing stocks, he shares insights about everyday life. Connect with Yannic on Instagram, LinkedIn, or download UP 365 below!