Investing in stocks without understanding what is going on is betting in a casino which I don’t think you are into. It is very easy to turn your investments into dumb money as the ‘fear of missing out’ will drive you to questionable investments.

There are a myriad of investment opportunities for where the unwise can part with their money:

  • Traded stocks
  • Investment funds / pension funds /Low-cost indexed funds
  • Options and commodities
  • Non traded stocks
  • FOMO investments

HEALTH WARNING. This section is complex. Just invest time and effort to read and understand. Otherwise, you will be vulnerable to people in the finance sector.

Traded stocks

In the past this was much more difficult, and you had to purchase economic quantities to make the stock brokers minimum fees reasonable. Now with the share trading platforms everything is at your fingertips. It is even easier to lose your hard-earned cash.

How to invest like Warren Buffet

Warren Buffet, called by many as the ‘Greatest investor alive today’ has always been open about the way he invests.  Pouring over his speeches, I have developed this checklist to help you gain an insight into Warren Buffet’s approach.

There are over twenty points to note.  If you can only handle five questions then this is my take:

  1. Do you know how the company’s money is made?
  2. Is there a high threshold for new entrants meaning that the company is sparred from fierce price wars?
  3. Has the management demonstrated a high degree of integrity, intelligence, and energy?
  4. Is the company conservatively financed with a below industry average debt to equity ratio?
  5. Is the CEO home grown? Outstanding organisations grow their own CEOs.


The Warren Buffet advice has been set out in the checklist using these important six categories.

Investment checklist incorporating Warren Buffet’s advice Each ‘No’ should be a concern
Checking the market timing for investment  
1.    Is the investment company, Berkshire Hathaway (Warren Buffet’s investment vehicle) buying stocks at the moment? This is a good sign that the market is under-priced. □ Yes □ No
2.    Is the ‘Shiller price earnings ratio for the S&P top 500’ below 20?  The number of years’ earnings it will take, at the existing level, to recoup the investment. □ Yes □ No
3.    Has the stock market / company been temporarily punished for a specific risk that is not a long-term risk? □ Yes □ No


When evaluating a prospect investment

Capital and clarity of business  
4.    Is the company conservatively financed with a below industry average debt to equity ratio? □ Yes □ No
5.    Do you know how the company’s money is made? (Never invest in a company you do not understand how they make their money) □ Yes □ No
6.    Is there a high threshold for new entrants meaning that the company is sparred from fierce price wars? (e.g., it is difficult for a new drink company to compete with Coca Cola) □ Yes □ No
7.    Does the company have favorable long-term prospects? □ Yes □ No
8.    Can current operations be maintained without a large reinvestment in plant and equipment? (This will require looking at the annual accounts, a task investors should be doing.) □ Yes □ No
Full template available from

Using the CAMELS rating system

For years, bank supervisory authorities around the world, have used six factors to rate financial institution’s ability to weather a financial storm. The CAMELS acronym is so appropriate for measuring ‘survivability’ as that is exactly what camels have mastered in the desert. The acronym, for the purpose of this book, stand for:

  • Capital and clarity – the company needs enough shareholder funds to facilitate operations without an over reliance on borrowings
  • Assets – saleability, remaining life span
  • Management – experience, time with organisation
  • Earnings – historic post tax earnings
  • Liquidity – cash reserves, the management of debtors and inventory, level of creditors
  • Sensitivity – the extent of any barriers to new competition, impact of international price drivers

Doing your own homework

A guideline would be somewhere between 10-20 hours of research in each organisation you are investing in. Your search should include reading:

  • Investor material of the target company’s website (presentations, press releases, the annual and quarterly reports)
  • Stockbroker research reports
  • Share analysis websites such as and to help you analyse the target company
  • Internet searches on: “company name” + “problems”, “company name” + “key director’s name”, “company name” + “CEO’s name”, “company name” + “concerns”

Buying blue chip shares

Register yourself on a share trading platform.

After doing your homework take a view about what you consider a good price is to buy at from looking at price movements in the last few years.

Put a buy order in at that price rather than buy at market price.  Remember, in any one day there can be a swing.  The computer can monitor the share price better than you can.

Buying high risk start-ups

If buying shares in starts ups it is even more important to do your own homework.  In addition to the Warren Buffet checklist follow these rules.


Small stocks investment rules Stock#1




Do your own homework.  A guideline would be somewhere between 10-20 hours of research in each organisation using the Buffet checklist. □ Yes □ No □ Yes □ No
Avoid taking investment advice from social media and the internet. Investment decisions must be based on your own research. □ Yes □ No □ Yes □ No
Ensure all those who you listen to are operating under some Governmental Financial Services Licensing arrangement making them accountable. □ Yes □ No □ Yes □ No
Full template available from


Selling shares

Always sell by putting a sell order in at a price you think can be met rather than sell at market price.

Avoid getting emotionally attached to an investment

If one of your stocks is the darling of the stock market, you can expect great gains and you can become emotionally attached to it; leading to irrational decision making.

Your Grandad and Grandma had amassed a small fortune in a banking stock having held it for over 40 years.  The sound Scottish management were taken over by a the ‘pin-striped suits brigade’ who sought growth at all costs.  The management were buying other banks at exorbitant prices.  They became the darling of the stock market. Investors like lemmings, jumped in without looking at the real worth of the company.

Your Grandpa was in a predicament. To sell at these over inflated prices would be the right idea but a capital gain tax bill in the hundreds of thousands would result.  Instead, he decided to hold on and wait until the shares went into his estate.  Unfortunately, a stock market crash occurred, and the holding was largely all lost and your Grandpa was mortified and was pained by this mistake until the day he died.

Get rid of your mistakes

Holding onto a failing stock in the hope that it will recover on day is typical of an investor who has invested more than just money in a stock, but also time and energy. They just do not want to face up to a poor purchase decision.  With a poor performing stock work out the current proceeds from a sale and ask yourself, “Would I invest this sum into this company now?”  If the answer is “No” just get out of the stock.

To avoid these problems, follow these rules:

  1. Never let a stock become more than 20% of your portfolio.
  2. Consider pulling out your original sum invested when your stock has tripled in value. If $3,000 invested and stock now $9,000, sell $3,000 to fund another investment. Leaving the gain to hopefully grow.
  3. Do not let tax considerations get in the way of the right decision.
  4. Set a stop loss share price that you will exit if it gets near this level.

Investment funds / pension funds / low-cost index fund

There are companies on the stock market that simply invest in a portfolio of shares. Some are highly geared as they also borrow money to buy shares.

More conservative is the pension fund you are in. Once you have selected what you think is a good pension fund manager select the growth option. When the stock market is going down still keep investing.

Warren Buffett advises people looking to build their retirement savings, to invest in diversified index funds. These simply mirror the index. If a top share becomes hot the fund simply buys some more shares and eventually sell others to constantly reflect the index.

Warren Buffett also advised, “Keep buying it through thick and thin, and especially through thin.”

Non-traded stocks

Crowd funding platforms now make it easier to lose your money. You now can invest in companies where the young entrepreneurs have no track record, are predicting sales of millions, on a concept that has not been tested.

If you want to do this treat this investment as a donation. Unless, you happen to know the people involved and you are able to do your homework.

Share options and commodities

If you have retired early and have few interests and probably bored with life these could be the very thing. They are not an investment you can put to one side and forget about. Quite frankly do not go there.

FOMO investments (crypto currencies, non-fungible tokens, artwork, stamps, coins and tulips)

The value of these is totally reliant on another person thinking that they will be able to buy it from you and make a profit on a subsequent sale.

The first FOMO investment was tulips. I kid you not. It took place in the 17th century. Investors began to madly purchase tulips, pushing their prices to unprecedented highs. The average price of a single flower exceeded the annual income of a skilled worker and cost more than some houses at the time.

How does this happen? Investors lose track of rational expectations where there is a massive, sustained upswing in the price of an asset. The ‘Fear of Missing Out’ leads them to invest without any attempt to assess whether it makes a smart decision.

When investors wake up and realize that they are merely holding ‘a tulip bulb’, a digital copy of an artwork, a that is vastly overvalued they start a sell-off. Prices collapse within days, or a week at the outside as everyone else realizes what their asset is worth. As in the 17th century tulip FOMO many investors lost most of the sums invested.

Crypto currencies

Crypto currencies are nothing more than a mass of computer power that consumes a lot of energy to verify and secure blockchains – the virtual ledgers that document cryptocurrency transactions. The data handlers (called data miners) are rewarded with new coins for maintaining and securing the blockchain.

If I asked you to invest in some unique computer code that could be stolen by hackers or companies that trade them, lost because you had entered the wrong password or had lost the E-wallet where it was stored, you would say I was mad.

In the very early days a good friend of mine was tech savvy enough to use his computer to process and validate transactions. In the early days your contribution to the block chain was much easier and the bitcoins you mined were worth a few cents. In his old hard drive were eleven bitcoins in his electronic wallet which is languishing in some computer scrap yard at best, or has been most likely been melted down to retrieve the valuable metals. The eleven crypto coins now being worth over $400,000.

Bill Gates doesn’t own any digital currency. In a recent interview he said:

“I like investing in things that have valuable output. The value of companies is based on how they make great products. The value of crypto is just what some other person decides someone else will pay for it so not adding to society like other investments.”

Non-Fungible Tokens (Non replaceable tokens)

NFTs are digital data stored in a blockchain typically contain references to digital files such as photos, videos, and audio. Famous digital artist Mike Winklemann, better known as “Beeple,” crafted a composite of 5,000 daily drawings to create “EVERYDAYS: The First 5000 Days,” which sold at Christie’s for a record-breaking $69.3 million in 2021 and now is worth a fraction of that.

Some other pearls of wisdom from Warren Buffett

“The critical investment factor is determining the intrinsic value of a business and paying a fair, or bargain price. “

“Risk can be greatly reduced by concentrating on only a few holdings.”

“Be fearful when others are greedy and greedy only when others are fearful.”

“Unless you can watch your stockholding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

“It is optimism that is the enemy of the rational buyer.”

“It is more important to say “no” to an opportunity, than to say “yes”.”

“Much success can be attributed to inactivity.”

“Wild swings in share prices have more to do with the “lemming- like” behaviour of institutional investors than with the aggregate returns of the company they own.”

“Turnarounds” seldom turn.”

“Do not take yearly results too seriously. Instead, focus on four or five-year averages.”

“Always invest for the long term.”

‘Remember that the stock market is a manic-depressive.”

“Buy a business, don’t rent stocks. Wide diversification is only required when investors do not understand what they are doing.”


This is an extract from a book called ‘Don’t say I never told you’.

The past has great lessons to offer. Whilst technology and the evolving pace of change may lead millennials to thinking that what is ahead of them is unique. In fact, it has all happened before. I am a father in my 60s who has gathered many lessons from the past, and I set them out here for my daughters in the vain hope that they will be a guiding light long after I am physically gone. Some of the suggestions may seem ridiculous at first, but I ask you to chew the crud and make an informed decision later. For a list of topics covered see here.