A Repeatable Research Workflow

What you will learn

• Understand why having a step-by-step process protects you from emotional decisions.
• Learn a simple, repeatable checklist for researching any stock.
• Discover the power of writing down your "thesis."

Core concepts

The difference between gambling and investing is process. A gambler hears a hot tip at a party and buys immediately. An investor hears an idea, runs it through a structured checklist, and makes a logical decision based on evidence.

A Research Workflow is simply a repeatable sequence of questions you ask every single time you look at a new stock. Having a workflow slows you down. It creates a buffer between the excitement of finding a new idea and the action of actually spending your money.

When you follow the exact same steps for every company, you start to notice patterns. You stop getting distracted by flashy news headlines and start focusing on the core health of the business.

How to turn one question into a process

You don't need a Wall Street degree to build a workflow. A beginner's research checklist can be as simple as these five steps:

1. Understand the Business: How exactly does this company make money? If you cannot explain their business model to a 10-year-old, stop here. Do not buy the stock.
2. Check the Financials: Are their sales growing? Are they making a profit, or at least moving toward profitability? Do they have a dangerous amount of debt?
3. Check the Valuation: Is the stock price reasonable, or is the market expecting impossible levels of perfection? (Remember the P/E ratio).
4. Identify the Risks: What is the single biggest threat that could destroy this company in the next five years? (A new competitor? Changing laws? A recession?)
5. Write the Thesis: Write down exactly why you are buying this stock, and what specific event would force you to sell it.

Writing down your thesis is the most powerful tool you have. If you buy a stock because "their new product will double their sales next year," write that down. If next year arrives and the product fails, you must sell the stock. Your thesis was proven wrong. You cannot change your excuse and say, "Well, I'll just hold it for the dividend." A strict workflow forces you to be honest with yourself.

Common mistakes

• Buying a stock immediately after reading one positive article or hearing a tip from a friend.
• Doing research after you have already bought the stock, just to make yourself feel better.
• Failing to write down exactly why you bought the stock and what would make you sell it.