Should You Sell Everything? Here's How to Know

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Worldwide Invest Better Day 9/25/2012

Happy Worldwide Invest Better Day! Today at Fool.com you'll find pages upon pages of advice for how to buy stocks and build a portfolio. If you're a beginning investor, you couldn't ask for much more.

But what if you've already tried investing? What if buying stocks hasn't worked out for you so far?  Should you sell everything and start over? I did. More on why in a minute; first, let me tell you about my first visit to Fool HQ.

The day I met David Gardner
In 2003, two years before I'd join his Motley Fool Rule Breakers stock-picking team, a friend arranged for me to meet David on a trip to Fool HQ in Alexandria, Va.


For me, it was a short but memorable meeting in a scrappy space that fit every rebellious image I'd imagined since reading The Motley Fool Investment Guide and the 13 steps to investing Foolishly in the late 1990s, including the half-deflated blowup Hulk doll sitting next to David's desk, an homage to his recent pick of Marvel Entertainment in the pages of Motley Fool Stock Advisor.

Our brief meeting kicked off with the one question I'd been dreading: "So, how many stocks do you own?"

"None," I said, nervously. "I sold everything because I decided I just didn't know enough about investing yet."

David's response: "I think we'd consider that very Foolish."

Cut to me, relieved. Smiling. Thrilled even, and re-energized to get back to the business of studying stocks, a process I'd begun after a series of embarrassing mistakes.

Past as prologue
Mistakes are partly what defines me as an investor. And not just investing mistakes: I'd piled up more than $45,000 in mostly credit card debt by the time my wife and I were married in 1997. Paying off that debt taught me valuable lessons about money as I learned the basics of investing.

But I wasn't patient with what I'd learned. Instead, I decided to begin buying stocks almost immediately. Early purchases included shares of Caterpillar (NYS: CAT) and Eastman Kodak (NYS: EK) , which I knew little about. Instead, I chose to trust a mechanical model called "The Foolish Four," which first gained prominence in the Fool's Investment Guide. Back in 1999 and 2000, both stocks fit the criteria set forth in the book.

Yet in buying, I'd tossed aside one of the principal lessons of the book -- that anyone willing to study businesses can become a market-beating investor -- in favor of a shortcut. Months later I'd compound the problem by tinkering with what to that point had been a proven model. Doing so cost me dearly. And yet I wasn't done throwing money away.

Around the same time that I put my wife in the Foolish Four stocks, I purchased shares of Amazon.com (NAS: AMZN) when CEO Jeff Bezos appeared on the cover of a popular business magazine. My reasoning: If Generic Business Monthly likes Amazon, then it must be a great stock. Neither the e-tailer's purported advantages over traditional distributors nor the future potential of digital book sales entered my thinking.

A few massive sell-offs later, my Amazon position was down 90%. I'd also forfeited what had been a 20-bagger in shares of Sun Microsystems that I'd purchased while an employee a few years earlier. My confidence as an investor had never been lower, and for good reason: I'd been buying and holding stock in businesses I knew little about.

By early 2003, months before my visit to HQ, I'd had enough. I sold everything and resolved to start over, fresh. So, instead of buying stocks, I bought books. I visited the library. I subscribed to Value Line. Peter Lynch, Ben Graham, and Warren Buffett became my teachers, though it was Philip Fisher who would inspire the style I embrace to this day.

My curriculum included building spreadsheets, calculating discounted cash flows, and pulling apart financial statements filed by the businesses that interested me most, including Akamai Technologies (NAS: AKAM) , a stock I continue to follow to this day.

My most profitable year of investing
As I think back, I'd say 2003 was my best year of investing. No, it's not the year I put up my best numerical performance; that would be the year Walt Disney bought Marvel for $4 billion. Rather, it's the year I started thinking -- I mean really thinking -- about how I might sustainably beat the market.

Taking the time to figure out a process was important. I learned how to score myself and along the way developed basic buying and selling rules I still abide by. Sure, I've tuned my process over the past decade, but not so much that the investor I was then would find me unrecognizable today.

Which brings us back to the question posed in the headline. Should you sell everything? If you've yet to develop a philosophy and process that works for you intellectually and financially, then I say yes. Sell it all. Refocus on who you are, what you know, and what you want to achieve as an investor. Study the masters. Pick a style that fits your personality, even if that style is simple indexing.  

In the end, that's what this day is all about. Everyone invests differently, but we can all invest better. So start. Enjoy the journey. And most important, know that you aren't alone. We'll be here to help however we can.

The article Should You Sell Everything? Here's How to Know originally appeared on Fool.com.

Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sweb home,portfolio holdings, andFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.The Motley Fool owns shares of Amazon.com.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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