The mission of this newsletter is to demystify stock investing.
Each Saturday, you'll receive a short email with a stock investing lesson.
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Many of the lessons we cover in Saturday Stock School are black and white.
Reading a balance sheet and determining a company’s cash position or debt load is straightforward.
Finding the P/E and P/S ratios is a calculation with clear, correct answers.
Other things are not so straightforward. Evaluating a business’s economic moat or a company’s culture is arguably more art than science.
Yet even with these types of tasks, other investors can assist you and offer credible opinions (that is why we find our own Long Term Mindset community so valuable!).
But there is one fundamental question that only you can answer: What kind of investor are you?
More than anything else, there might not be a more important question to answer for investors.
Why is it so important?
Stock market corrections (defined as drops of at least 10%) are relatively common. According to research from Charles Schwab, 10% or more pullbacks occurred in 10 of the past 20 years.
Individual stocks suffer even worse bouts of volatility. One of the worst things investors can do is sell in a moment of panic, yet fear will cause many investors to make unforced errors during these downturns.
No matter how well investors value companies, discover moats, and evaluate management teams, if they sell every time the market drops, they will never outperform the market.
This is why we believe Shakespeare’s advice is paramount for investors (even if we’re taking this a little out of context):
“This above all: To thine own self be true.”
The two big questions
This matters in a myriad of ways, but two rise above the rest in matters of importance:
1 - Stylistically, what kind of investor are you?
Many investors self-identify as growth investors. They don’t mind paying up for potential growth. Many of these investors will hold a few big winners, and the gains will more than compensate for many stocks that end up as duds.
More conservative investors prefer investing for income, finding stocks with growing and sustainable dividends.
Other investors are more value-oriented. They look for stocks selling lower than their perceived intrinsic value. They will buy with a margin of safety and sell as the price exceeds its intrinsic value.
No investing style is definitively better or worse than the other, though each will go in and out of the market’s favor. Investors in each category have made lots of money.
What’s important is that investors find the style that suits them best because when their style goes out of favor, they must hold through the hard times.
2 - How many stocks should you own?
Another area where this question reigns supreme is the number of stocks one should own in one's portfolio.
Again, there is no right or wrong answer. It’s much more a matter of what makes an investor comfortable.
Some investors, such as Peter Lynch, are comfortable owning hundreds of stocks. This minimizes the loss from a single position and adds diversity to a portfolio.
Other investors are much more comfortable owning a concentrated portfolio, where gains from just a few positions can drive significant returns. These investors are comfortable giving up some diversification in exchange for knowing a few companies well.
Like before, it’s essential to know what kind of investor you are so you won’t make an unforced error during a downturn.
For some investors, running a concentrated portfolio will cause them to worry about the relative size of each position. This worry can easily cloud investors’ judgments when the company misses earnings or is downgraded by an analyst.
For other investors, owning hundreds of positions can lead to panicked selling because they don’t know all their holdings well. This leads to concern as stocks fail without investors' confidence to discern whether it’s a long-term buying opportunity.
The answers to these questions highlight why investors must know and understand themselves to succeed. Trying to mimic another’s strategy or philosophy may work in the good times, but it is doomed to fail when the inevitable bear market hits.
See you next Saturday! - Brian Feroldi & Brian Stoffel
On my other blog I wrote yesterday about Thomson Reuters Corp (TSX-TRI, NASDAQ-TRI) ... learn more. Next, I will write about WSP Global Inc (TSX-WSP, OTC-WSPOF) ... learn more on Friday, May 15, 2026 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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