Invest In What You Know
One of the most common questions I'm asked by new investors is how to figure out what companies to invest in, and without fail I always provide the same answer: "invest in what you know." This notion of investing in what you know is one of the hallmarks of successful investing.
When I started investing over 15 years ago my primary focus was on purchasing bank stocks, and the main reason for this was because I had worked in the banking industry for 8 years. Since I was very familiar with the banking industry, I found it less intimidating to invest in bank stocks, and actually became excited to delve into the financial statements and conduct investment research on this topic.
It was also very helpful to have worked in the banking industry because I got to see first hand the new technologies that were being developed at the bank, which in turn led me to invest in certain banks over others. Nonetheless, I was able to make great returns on my...