Good morning everyone,
So, i am excited to bring you our first guest article. As you know, i am super passionate about sharing ideas and points of view. It may be that, in future i have guest writers who may have opposing views to myself. I like to avoid confirmation bias in my own life, and feel its a skill most people would benefit from adopting.
Worth noting that the diversity in guests is also going to be wide. In terms of age, experience, and outlook. I have some awesome guests lined up, but today’s guest was the most timely and gets the honor of being number 1 in the guest article series.
Our first guest, is Jaxson B, who is a 17 year old investor based in the States. Don’t let the age fool you. I have had a few interactions with Jaxson now, and he has his head firmly on his shoulders. After numerous hustles as a younger man, including a very successful foray with Instagram, Jaxson can be found spitting insight beyond his years on Twitter. From my perspective, Jaxson is a value investor, and sticks to that outlook very well. I was amazed by the wisdom of a young man of only 17 years of age.
You can find Jaxson on Twitter @Jaxben26
Guest Article, Edition Number: 1
The Following Article is an un-doctored edition of Jaxson B’s insights into understanding risk/reward within investing.
Understanding your risk/reward in investing is very valuable.
If you are risking $1 to make $3, then that’s a 1-to-3 risk/reward ratio.
If you are risking $1 to make $0.50, then that’s a 2-to-1 risk/reward ratio.
You want something like a 1-to-3 or higher. That way you can invest your money more efficiently.
The problem with this is many people don’t analyze the r/r ratio in an investment.
Think of Apple.
Apple is now trading at all-time highs.
Would you say that Apple is at an optimal risk/reward ratio for your money?
Apple is not at a 1-to-3 risk/reward. Maybe not even a 1-to-2. Yet many people invest their life savings into big corporations like Apple, when they should be looking elsewhere.
I look for smaller companies, with less than a $10B market cap. These companies have less analysts covering them, which means they can make big moves and still go mostly unnoticed.
This is the opposite for mega-cap stocks. Another thing... Do you see Apple doubling or tripling in the next 4-5 years?
But a company you have never heard of can easily quintuple in a couple years before you start hearing about it.
That is why the true wealth is found within the small companies. Under-analyzed and overlooked companies are the perfect recipe for outstanding performance.
So. How can you apply this?
Start looking outside of your everyday mega corporations. Go to different screeners (I recommend Finviz.com) and look for companies based on your preferred criteria. Don’t shy away from companies you have never heard of.
Start looking at investments with a preferred risk/reward ratio in mind. Ask yourself if the investment you are about to take is a use of your money in an efficient way. If not, avoid.
Only take bets that are in your favor. Never act on impulse and always research a company thoroughly before thinking about investing.
Thank you for reading the first ever guest article here at the IT newsletter, and be sure to give Jaxson some love and check out his Twitter page @Jaxben26
For context, i have requested from guest writers that the articles be no more than 2,000 words in length. So expect varying lengths of articles. Jaxson’s article today was around 350 words. Short and sweet.
If you like this new value-add to the newsletter feel free to drop a comment below with some feedback :)
These guest articles will always be free and are not part of the premium subscription.
The incentive here, is to share some great content creators and get some fresh insights from new people.
Hope you enjoyed it as much as i did, have a great day,