An Introduction to Investing with A.I.

Investing requires more than just theory. Which is why I publish most of my investment ideas online. It requires me to highlight the strengths and weaknesses of each idea. Also it's much easier to receive investor feedback in the open.

Throughout my investment journey, I always find myself revisiting the fundamentals of investing. Whether it is to reread financial statements or review different market risks. The goal is each time to reduce the chance of error when investing.

That's why I published this free investment content to help other investors along the way. These videos teach individuals how to conduct market research, analyze financial statements, and make informed investment decisions. The first nine videos were recreated with A.I. At the bottom, you will see my livestream on how built the material with commentary.

This post is sponsored by Seeking Alpha. Each month, Alpha Picks investors receive 2 data-driven stock picks to hold long-term. If you subscribe to Alpha Picks today with my link, you will receive $50 off your first year subscription. Click here to learn more.

The Fundamentals to Stock Market Investing

Why are fundamentals important?

Think of your favorite athlete. Before any big game, they always warm up with the basics, right? Dribbling drills, free throws, those essential moves. Investing is no different. Mastering the fundamentals allows you to build upon a strong base and make informed decisions in the exciting world of finance.

Let's start with the Fundamentals

Discount rates: Imagine you're offered $100 today or $100 a year from now. Which would you choose? Most likely, you'd take the $100 today. This is the core idea behind discount rates. They help us determine the present value of future cash flows, taking into account the time value of money and the opportunity cost of investing.

Equity vs. debt: These are the two primary ways companies raise capital. Equity represents ownership in a company, like buying a slice of the pie. Debt, on the other hand, is like borrowing money and promising to pay it back with interest. Understanding the balance between equity and debt is crucial for analyzing a company's financial health.

Intrinsic value: This refers to the true or inherent value of an asset, independent of its market price. It's like figuring out what a diamond is truly worth, beyond its sparkle and current market trends.

Business models, the competitive advantage, Management, Corporate governance and the Industry are other important variables as well.

Market Research for Stock Market Investing

Before you put your hard-earned money into any stock, you need to understand what you're buying. Market research helps you make informed decisions, identify opportunities, and manage risks.  

Here are Beginner Steps for Effective Stock Investment Research.

1. Define Your Goals and Risk Tolerance: Start by outlining your investment objectives. Are you looking for long-term growth, or are you more focused on short-term gains? Knowing your risk tolerance is key – how much volatility can you stomach?  
2. Deep Dive into the Company: Explore the company's website, read their annual reports, and pay close attention to their financial statements. Get to know their products, services, and overall business strategy.  
3. Analyze the Financials: Examine the company's income statement, balance sheet, and cash flow statement. Look for trends in revenue, profitability, and debt levels.  
4. Assess the Management: Research the experience and track record of the company's leadership team. A strong management team can make all the difference.  
5. Analyze the Industry and Competition: Understand the industry's dynamics, growth potential, and competitive landscape. Who are the main players, and what are their strengths and weaknesses?  
6. Follow Market News and Trends: Stay informed about market events, economic trends, and news related to the company and its industry.
7. Diversify Your Portfolio: Don't put all your eggs in one basket. Spread your investments across different stocks and asset classes to reduce risk. 

Financial Statements for Stock Market Investing

Why are Financial Statements Important?

Think of financial statements as a company's report card. They tell you how the business is doing, where its money is coming from, and where it's going. Ignoring them is like driving blindfolded – you never know what you might hit.  

There are three main types of financial statements:

1. Balance Sheet: This statement provides a snapshot of a company's financial position at a specific point in time. It shows what the company owns (assets), what it owes (liabilities), and the residual value belonging to shareholders (equity).
2. Income Statement: This statement shows how much money a company has made or lost over a specific period. It starts with revenue and subtracts expenses to arrive at net income. Think of it as a company's profit and loss report card.  
3. Cash Flow Statement: This statement tracks the movement of cash both in and out of a company. It's divided into three sections: operating activities, investing activities, and financing activities. This statement is key to understanding a company's liquidity and its ability to generate cash.  

You can use financial statements to analyze trends, calculate financial ratios and compare with competitors.

Valuation Models for Stock Market Investing

Why is Valuation Important?

Imagine buying a car without knowing its price. You could end up overpaying, right? The same applies to stocks. Valuation helps us determine whether a stock is overpriced, underpriced, or just right. Allowing us to make informed investment decisions.

There are various methods to value a company, but let's focus on a few key ones:

1. Sum-of-Parts Valuation: This method is particularly useful for conglomerate companies with diverse businesses. It involves valuing each business segment separately and then adding them up to arrive at the total value of the company. This is helpful for companies like Alphabet, which has a wide range of businesses, from Google Search to Waymo self-driving cars.  
2. Discounted Cash Flow (DCF) Analysis: This is a widely used method that estimates the present value of a company's future cash flows. It's like predicting how much money a company will make in the future and then discounting it back to today's value. This method is favored by Warren Buffett. It involves estimating future cash flows and discounting them back to present value using a hurdle rate.  
3. Comparable Company Analysis: This method involves comparing a company's valuation ratios, such as price-to-earnings (P/E) or price-to-sales (P/S), with those of similar companies in the same industry. For example, we might compare the P/E ratio of Coca-Cola to that of PepsiCo to see if one is relatively overvalued or undervalued.  

How to Value Your Ideas

Now, let's talk about valuing your own investment ideas. It's crucial to use logic and avoid emotional biases. Don't get swayed by market hype or the latest trends. Instead, focus on the fundamentals and use a combination of valuation methods to arrive at a well-rounded estimate.

Managing Risks for Stock Market Investing

Welcome back, investors! Today, we're tackling a topic that's often overlooked but absolutely critical: managing risks. Even the savviest investors know that not every trade will be a winner. The key is to minimize potential losses and protect your hard-earned capital.  

Understanding the Landscape of Investment Risks

1. Geopolitical Risks: These are the wild cards in the investing world. Political instability, wars, and regulatory changes can significantly impact your investments. Think of events like Brexit or the ongoing trade tensions – they can send shockwaves through the market.  
2. Market Risks: These are the risks inherent to the entire market. Economic downturns, interest rate hikes, or even a global pandemic can affect the overall performance of your portfolio. Remember the 2008 financial crisis? That's a prime example of market risk in action.  
3. Company-Specific Risks: These are risks related to a particular company or industry. A product recall, a management scandal, or even a disruptive technology can severely impact a company's stock price. Think of what happened to companies like Enron or Blockbuster – they faced significant company-specific risks that ultimately led to their downfall.  
4. Economic Risks: Inflation, for instance, can erode the value of your investments over time. High inflation means your money buys less in the future, impacting your returns.  

Manage Risks with diversification and hedging. Don't put all your eggs in one basket. Spread your investments across different stocks, sectors, and asset classes. Also consider using hedging strategies, such as options or futures contracts, to protect against potential losses. It's like buying insurance for your investments.

Finding Catalysts for Stock Market Investing

Why are Catalysts Important?

Think of catalysts as the fuel that propels a rocket. They're the game-changers that can transform a company's trajectory and unlock significant value for investors.  

Types of Catalysts

1. Product Launches and Releases: A successful product launch can generate massive hype and drive rapid sales growth. Remember the iPhone? Its launch was a catalyst that propelled Apple to become one of the world's most valuable companies.  
2. Expansion into New Markets: Entering new markets can significantly expand a company's customer base and revenue streams. Think of Netflix's global expansion – it was a catalyst that fueled its explosive growth.  
3. Mergers and Acquisitions: A strategic acquisition can create synergies, boost market share, and unlock new opportunities. The recent merger between Disney and Fox is a prime example of an M&A catalyst that reshaped the entertainment landscape.  
4. Technological Advancements: Innovation can disrupt industries and create entirely new markets. The rise of electric vehicles, driven by Tesla's technological advancements, is a catalyst that's transforming the automotive industry.  
5. Positive News and Events: Favorable earnings reports, analyst upgrades, or even a surprise dividend increase can act as catalysts, boosting investor confidence and driving up the stock price.  

To identify catalysts, stay informed and keep a close eye on industry trends, company news, and market developments. Then think critically to analyze how potential events could impact a company's future performance and valuation.  

Catalysts are the driving force behind many successful investments. By identifying and capitalizing on these game-changing events, you can unlock significant value and achieve your financial goals.

Making Investments for Stock Market Investing

When to Invest

There's no single "right" time to invest. The best time is when you've found a solid investment opportunity that aligns with your financial goals and risk tolerance. It could be when a company is undervalued, when a new product is launched, or when the market takes a dip. The key is to be prepared and ready to act when opportunity knocks.

How to Make an Investment

These days, investing is easier than ever. You can open an online brokerage account, deposit funds, and start trading in minutes. Just remember to research different brokers, compare fees, and choose a platform that suits your needs.

Managing Your Investments

Investing isn't a "set it and forget it" activity. It's crucial to actively manage your investments, monitor their performance, and make adjustments as needed. This might involve rebalancing your portfolio, adding new investments, or selling underperforming ones.

Why is Investment Management Important?

Think of your investments like a garden. You need to tend to them, water them, and prune them to ensure they thrive. Investment management helps you stay on track, minimize risks, and maximize returns over the long term.

Summary for Stock Market Investing

Livestream video to create the course