These principles will increase your chances of successfully investing in stocks. These are the same principles we implement in our Focused Equity Portfolio at Freedom Financial Solutions.

1. The KEY to Success
in the Stock Market
Adam Zuercher, CPA, CFP®
Freedom Financial Solutions, LLC
419-425-2400
azuercher@ffsllc.com
1

2. Warren Buffett’s Rules
“The first rule of investing is don’t lose
1.
money.”
“The second rule is don’t forget rule
2.
number one.”
“Be fearful when others are greedy, and
3.
be greedy when others are fearful.”
2

3. Remember this…
buy QUALITY businesses
@ ATTRACTIVE prices,
…
sell when quality DETERIORITES
or when price is OVERVALUED
3

4. Think like a BUSINESS owner,
not like a STOCK trader
“If you’re not willing to own a stock for 10

years, do not even think about owning it for 10
minutes.” –Warren Buffett
“Analyzing a company’s stock on the basis of

earnings and assets is no different from analyzing
a local laundromat, drugstore, or apartment
building that you might want to buy. Although it’s
easy to forget sometimes, a share of stock is not
a lottery ticket. It’s part ownership of a business.”
–Peter Lynch
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5. Buy QUALITY businesses
Strong financial condition

Earnings stability (high predictability)

A dividend payer

Earnings growth

High return on equity (ROE)

Prefer 15% +

Long-term competitive advantage (wide

moat)
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6. @ ATTRACTIVE prices:
Low price to earnings ratio (P/E)
Price-Earnings (P/E) Ratio = a measure of the multiple of earnings

at which a stock sells. Determined by dividing a stock’s price by its
earnings per share
The P/E ratio represents the “expensiveness” of a stock

Look for quality companies with low P/E ratios – your goal is to buy

earnings as cheap as possible
The P/E Ratio can be thought of as the number of years it will take

the company to earn back the amount of your initial investment
(assuming that the company’s earnings stay constant)
Example: Buy 100 shares ABC for $3,500; current e.p.s. = $3.50; the

original investment will be earned back over 10 years; P/E = 10
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7. @ ATTRACTIVE prices:
… high earnings yield (E/P)
Earnings Yield = earnings / price

Earnings Yield = inverse of the PE Ratio

P/E Ratio E/P or Earnings Yield

25 4.0%
20 5.0%
15 6.7%
10 10.0%
Suggested Rule: Your earnings yield should be at least

as high as the current high-grade bond rate. (10 Year
Treasury Note Yield)
7

8. @ ATTRACTIVE prices:
An attractive investment
ROE > PE

= quality business at a bargain price (most of the

time)
8

9. Sell when…
QUALITY deteriorates

Declining…

ROE

Dividends

EPS

Detrimental change in management or business

focus
Misinformation

PRICE is overvalued

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10. MISTAKES TO
AVOID:
1. Reacting to
emotion.
2. Speculating.
3. Failing to do
your own
research.
10

11. The Cycle of Market Emotions
11

12. Advice from the media?
12

13. Investment Temperament
Stay within your CIRCLE OF

COMPETENCE
invest only in what you understand
1.
don’t speculate
2.
Be DISCIPLINED

…about doing your homework
1.
ignore the noise from the crowd &
2.
the media
Be PATIENT

avoid emotional investing
1.
think long-term
2.
13

14. The KEY to success in stocks…
buy QUALITY businesses
@ ATTRACTIVE prices,
…
sell when quality DETERIORITES
or when price is OVERVALUED
14

15. www.ffsllc.com
Our mission is to provide wealth creation and
wealth management solutions that enable our
clients to achieve financial freedom.
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INDEPENDENT | FEE-ONLY | PRUDENT INVESTING | PRIVATELY MANAGED ACCOUNTS | EXCELLENT SERVICE

16. www.ffsllc.com
Firm Co-founders:
Tony Hixon (left)
Adam Zuercher (right)
Freedom Financial Solutions is an independent, fee-only investment
management firm.
We invite you to experience the peace of mind that comes from having
your money professionally managed by people who take a genuine
interest in you, your family, and your goals.
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17. information presented is past performance. Investment return and principal value of debt and equity
The
securities will fluctuate so that an investor’s shares on redemption may be worth more or less than the
original cost.
are risks involved with investing, including loss of principal.
There
addition to the normal risks associated with equity investing, narrowly focused investments and
In
investments in smaller companies typically exhibit higher volatility.
indices illustrated herein are unmanaged indices. You cannot invest in an index. Index returns do not
The
reflect the impact of any management fees, transaction costs or expenses. The index information seen
here is for illustrative purposes only. For more information, please consult your financial advisors.
performance does not guarantee future results.
Past
stocks used in this presentation are used for illustration purposes only. Freedom Financial
Specific
Solutions does not endorse an investment in these stocks.
concepts presented here do not constitute an all inclusive investment strategy.
The
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