The more I try to learn about stocks the more I think it’s gambling

Thus spoke my German friend who has never bought a stock in his life. His comment got me thinking. How can I best explain that investing is not the same as gambling? And what are the safest companies for people who are new to stocks and afraid of investing?

WHAT¬†NOT TO BUY:¬†For starters here’s¬†what to avoid like the plague.¬†Stay away from junior gold-miners, offshore drillers and Brazilian airlines. In short, anything that’s moved up or down by 10-20% in a trading day over the past six months. Yes, you can double or triple your money in no time¬†with such stocks, but most likely you’ll lose it all. It’s paramount you don’t buy¬†such companies, at least in the beginning.

Always the daredevil I once¬†doubled my money on¬†a Brazilian airline (GOL) by trading in and out five times over a six month period. A year later I learnt my small cap lesson when I lost 94% of principal on the offshore driller (NADL) after Western sanctions on Russia derailed that company’s expansion plans.

Note to self:¬†volatile small cap stocks are 50/50 propositions. It’s gambling!

WHAT TO BUY:¬†Invest only in companies with a strong track record of earnings growth that have not financed said performance by taking on excessive debt. In other words, stocks¬†with serious staying power that will soldier on regardless of any short term headwinds in¬†the wider economy. Below are three such stocks that I consider safe long term buys you can hold forever. Images are of the respective companies’ 10 year chart.

 

World’s¬†Safest Stocks

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  • Sikishrory

    I am in a very similar situation to you in that I work offshore and am a non tax resident of my home country. I also spend my spare time in Thailand and lived/worked therein the past.
    I feel shitty knowing my cash is sitting in a savings account doing nothing. I want to buy some index funds like you mention but don’t know what broker to use. Can you recommend any online? The aussie ones i looked at charge extra if it its not the aussie stock exchange. Any ideas?
    Cool blog by the way!

    • interactivebrokers.com should solve your problems ūüėČ

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