How to Find Cheap Stocks in the Stock Market – Part 2

How to Find Cheap Stocks in the Stock Market – Part 2

Your Money

We divided the text into two parts to improve readability for you (after all, no one wants to read 5,000 words at once) and also to highlight the importance of this topic here. After all, we are talking about your hard-earned money. Valuing your money is just as important as finding undervalued stocks on the stock market!

Plan Your Contributions

At this stage, you need to know how to manage your money from day 0. Planning contributions is as important as winning and controlling losses. Because if you have the first ten steps calibrated, it’s much easier to withstand the hits that the financial market gives us. Believe me, it will…

Above all, your main focus should be to survive! That’s exactly what you read. Making money investing depends directly on how many punches you can take and keep moving forward, contributing more and more.

I vividly remember 2013, when I started investing seriously in the Stock Exchange. The country was in bad economic shape. I told some people about my plan and how I was investing at that time. Everyone thought I was crazy. That’s when I knew for sure I should keep doing it.

After all, I took 10% of my salary and commission. If I lost everything, I would still have 90%. From there, I invested. I closed the home broker and focused entirely on: Working, studying and taking care of my health. I didn't read anything about the market, didn't have any app on my cell phone, and didn't want any social media calls. I just wanted to take a part of my savings, apply it, and move on.

All this was only possible because I focused on a single goal: Contribute 10% per month, every month, and in two years I would look at my portfolio. Just that. Simple! Black on white…

Now for three hypotheses about contributions:

• You have a large amount to invest at once.
• You will invest a part of your earnings monthly.
• You invest monthly + periodic bonuses.

Regardless of the approach you choose, I believe it is always better to be invested than not (at least a part of the money). This is due to the loss of compound interest. You will hardly hit the market timing¹ of the market. It could be like me, who got it right by pure luck. However, never believe that you are awesome or above average. I don’t know anyone who lost by being humble.

I know, I know. However, it’s very hard to talk about investments without mentioning the big dog of the stock market, Bastter. The guy isn’t a genius, doesn’t use a flashy system, and doesn’t suck up to anyone. He just uses his experience and common sense to make important decisions. And, of course, he learned to take hits and stay on his feet…

Define Specific Rules About Investment

Now for the set of rules for your system. First of all, I tell you: Create something simple that works for you.

When I started investing, I was very focused on fundamental analysis. I’ve always liked reading. Therefore, reading company reports became something pleasant and routine for me. Obviously, you don’t need to be Buffett or Munger. However, I repeat: You need to use a system where you feel comfortable.

At the beginning of my journey, everyone said the secret was to memorize candle patterns, then came the indicator fever, followed by the ready-made templates fever, Bots, HFTs and now we have AIs. In fact, there is no hidden secret. People say that to sell you things. The formula is simple:

Work > Earn > Save > Invest in yourself > Increase your earnings > Save even more > Invest for years > Use this money for your bigger goals > Repeat.

BUY	You need to create a system where your purchase can always be the lowest price available or try to dilute that price through average price. Buying periodically (monthly, quarterly, annually).
HOLD	The decision to hold your investment is very delicate. These days I read an article by a friend from the “finasfera” who sold his position in Ambev. According to him, the numbers are no longer so attractive. For me, all I see is a company with a monopoly sitting on a cash pile of R6 billion. In short, remember why you bought.
PARTIAL	Here, you understand that the asset has reached an interesting price threshold. You feel it’s time to put some of the profits in your pocket. And, who knows, change your iPhone… Or simply withdraw R0,000 to travel with the family. Money is made for this… Use it!
SELL	This is, in my view, the hardest part of all. Generally speaking, we are “blinded” by reports, news, charts, financial pressure, and others. In general, I consider that selling is prohibited until the investment matures for three years. If you spent 6 months researching an asset and buying gradually, why on earth would you sell it on its first 5% drop? It is forbidden to sell! (Until your “child” is 3 years old.)

Your Goal is to Profit! Don’t Romanticize!

However, nonetheless… Don’t romanticize! If you bought VALE3 and hit your profit goal, REALIZE IT! If you bought WEGE3 and hit your selling rule, SELL IT! You need to follow your set of rules. If you don’t follow them, why did you create them? If you can’t do it, invite someone to help you monitor and pull your ear when necessary.

Monitoring

In this phase, it is vital that you can monitor your investments as far away as possible to avoid FOMO².

Google Alerts

You can use Google Alerts. Basically, it’s a way to monitor topics in a certain language and region of the world. You define the frequency and receive updates in your email. I always recommend the longest possible interval.

TradingView

I’ve always liked TradingView very much. I’ve used it for years and it needs no introduction. You can use up to 2 alerts on the basic plan, if I’m not mistaken.

Trading Economics

This one is a gem! I love this site for doing my macro analysis. It combines simplicity with an incredible database. When you log in, you can configure different alarms for different assets that are triggered directly to your inbox.

Company Investor Relations (IR)

Every time you type IR + Company name in Google, you fall into the “alligator’s mouth”³.

When accessing any company’s IR, you need to sign up for the email list and that’s it! Every company update reaches your inbox fresh. Where do you think news portals get them from? 😜

Allocation

This part is very important indeed for things to work properly. In Part 1, I told you that I once got stuck in assets for not having liquidity and I kept buying a lot. I’ve had a lot of money invested and not even a thousand reais in savings. Unfortunately, like it or not, before investing you need to:

1. Put R,000 in savings.
2. Pay off your debts.
3. Increase your savings to 3 months of living costs.
4. Finally invest 10-15% per month. Every month.

Yes, I learned and am very inspired by Uncle Dave… So, before you run, learn to walk. Before you walk, stand up. And before that, learn the baby steps.

Simplify things. Always!

Traditional Model

Contribute monthly, divide into 10-20 assets to diversify risk. Then you protect yourself so well from risk that you “protect yourself even from profit too”… Think about it: your goal is to make money to improve your life. You want to become a millionaire or multimillionaire as young, fit, and healthy as possible. Therefore:

• Invest in yourself first!
• Knowledge
• Experiences
• Connection with good people
• Health

Start something of your own! (For yesterday)

If you are an employee, a civil servant, or work at some city hall, I highly recommend that you start something of your own. First, because it will be YOURS! Your only partners are God and the Government. The reason is that you have power and autonomy over the business. It creates an alternative source of income and gradually it can grow and become something significant in the future.

You need to start somewhere and somehow. A site, a YouTube channel, an app, a social network, a TikTok account, an iFood account, a Mercado Livre account.

Go to the internet, commit to making it happen for a period of time, and generate value in people’s lives. You don’t need to be the first, the major, or even the best. Faça o seu, com o que tem e hoje mesmo. Don’t wait for all conditions to align. The top computer, the top microphone, the inspiration to write, learning 100% of a programming language to make your app, and having money for paid traffic for a social media account.

I realized that “sites are my thing”…

This very site didn’t even generate 0 in the first year. I wrote more than 80 articles by hand and spent hours during the weekends promoting it on many channels. We’re completing two years this year. And only now has it gained traction. This only happened because I stopped thinking that keeping the gold for myself would do me good. Only serve people with the best product/service you have. On the journey, you will discover what is best and how you will make money with it.

So… Start, persist and be patient. (Being patient was the hardest for me. I thank my wife every day.)

Educate yourself more and more. There is wisdom in everything and everyone. You can always learn from someone or something. A R0 book can generate a million-dollar idea for you. You only have to gain. Polish new skills and languages. Don’t think you’re too old, that there are no opportunities, and so on. If you’re reading this, know that you have more resources than many nobles of the feudal era.

My Model

Now I’m going to talk about my way of doing my investments. I like to gather some initial cash before contributing. I divide it into two parts:

• 50% Cash (doesn’t have to be a rule) > If the asset bought drops X%, I contribute 5% of the cash.
• 50% Invested > Allocated in 2-6 companies, depending on the risk I want to take. > Asset rose to my target? Partial 25% of the bought position. Asset fell X%, I contribute with the cash.

I’m also a fan of the crisis system. As I wrote here, every time I see a financial crisis, I see an opportunity to be less poor. Consequently, richer. Once a wise man told me:

In a crisis, the rich enter rich and leave rich. The poor must seize the chance, use courage, and leave less poor.

Finally!

We’ve reached the end, I wish everyone good luck in your investments and in life. I’ll leave this article open for a while if you have questions, send it to your tangled and/or “lost” friends in life. Explore our site, the gold is here!

Disclaimer

Nothing I write here is an investment recommendation or a call to buy and sell. Draw your own conclusions and see what is best for you. Past results are no guarantee of future results. Take care of your money, because no one will do it for you.

1. Timing is the ability to act, speak, or decide at the most opportune moment. It is considered the “sense of opportunity,” essential for success in business, sales, and communication, allowing for maximized results by taking advantage of the correct pace of situations. ↩︎
2. FOMO is the acronym for “fear of missing out.” It is the social anxiety that others may be having rewarding experiences while you are not present, amplified by the excessive use of social networks. This feeling generates compulsive checking for updates and low self-esteem. ↩︎
3. Silly expression about falling into the right place. ↩︎