Welcome to "Buy Homework" Service

September 5th, 2010 | coke

Like many investors that lost money during the most recent financial crisis, my portfolio became too painful to look at. Instead of paying more attention to my investments as I should have done, I chose to ignore my portfolio because the stock market was too depressing.

A few weeks ago, I had a revelation. It made no sense for me to not spend the time and work necessary to research and manage my portfolio because (1) the majority of my assets are invested in individual stocks and (2) investments in individual stocks are among the most expensive purchases that I will ever make in my life.

I turned to Real Money by Jim Cramer who advocates a buy homework approach as opposed to buy and hold.  This ideology states that you should spend at least one hour per stock per week on researching the company and that if you are unwilling to put in this time, you should not own individual stocks.  It is a simple and profoundly logical investing ideology.  Buy and hold, on the other hand, encourages investors to be lazy.  It encourages investors to ignore their portfolio like I did in the mistaken belief that if they hold a stock for long enough, they can make money.  The most recent financial crisis reveals the flaw in the buy and hold ideology: it is not guaranteed that a stock can recover its losses.

You can lose a lot of money investing in individual stocks.  And the only way to know if a stock is going up or down is through research.  Buying an individual stock is one of the biggest purchases you will ever make in your life, yet we often put less time considering our decision compared to other, more trivial purchases.

The source of these 9 buy and homework research steps are a combination of Jim Cramer’s advice in Real Money and my own research.  I created this website so that it would give me the discipline to actually perform the necessary research on my own investments.  When reading Real Money, I found that I knew I had to do the homework, yet I still lacked the discipline to do so.  Hopefully this tool will help me and help others as well.

This blog will be updated infrequently.  If you wish to contact me, please email me at contactbuyandhomework@gmail.com.