Buy what you know is the way to go... June 2, 2015 Archives | Unsubscribe Why the "Worst Investing Advice Ever" Can Make You Rich Buy what you know is the way to go 3 simple steps to making this strategy work Plus: Are your arteries clogged? Greg Guenthner coming to you from Baltimore, MD... Warren Buffett and Peter Lynch have been misleading you all these years! They've always encouraged you to buy what you know. Sounds like it makes sense, right? I mean, what in blazes does a hardhat know about biotech? But according to a recent MarketWatch column, buy what you know is the "worst investing advice ever". So buy what you know is now bunk, eh? That sounds pretty harsh. As you'll see, it's only half-true. And understanding the full meaning of buy what you know could make you a lot of dough. So today I'm giving three specific rules to help you figure it out... The author of that column uses Twitter stock as a prime example of how buying what you know (and love) can get you into serious trouble. "So if this is such an amazing company, why is Twitter stock down more than 30% from its peak last fall?" he asks. "And longer term, why is it down by double-digits since its first print after its 2013 IPO, while the S&P 500 is up 20% since the day Twitter went public?" Fair questions. But I think they're way off base. Sure, buy what you know is overused and oversimplified. But the worst advice ever? Hardly. In fact, I think you can get rich buying what you know. You just have to follow a few simple rules: Think in trends. Buy what you know doesn't mean you should only buy products you love and use everyday. That's ridiculous. You might love McDonald's. But if you've been paying attention you know it's a dog of an investment. Instead, buy into big trends you believe in. This is the stuff that's right in front of your face ranging from consumer products to energy or even social networking. Yeah, it's easy to rag on Twitter. But what about Facebook? That's the most obvious (and popular) social network play on the market--and it's up nearly 170% since it went public. Chew on that one, MarketWatch. Don't let your bias ruin your returns. "The biggest risk of buying what you know is that you will ignore other people and believe that your perception is the only reality," MarketWatch further declares. Well, yeah. But that's also a risk you run with any trade or investment. If you like Lululemon yoga pants but the stock hits your stop level, you sell. Period. But don't worry-- you can keep the tights. Keep it simple. Don't think that buying what you know means you have to understand every aspect of the business. Take cybersecurity, for example. I have no clue how these big cybersecurity firms defeat hackers. But I do know identity theft is on the rise. That's a huge trend! So even though I don't know the ins and outs of the business, I do know it's a huge wave I need to ride this year. The verdict? Buy what you know is far from the worst advice ever. If you're smart enough to figure it out it can be your greatest money making ally. U.S. seniors now collecting $4,700 per month by piggybacking "Canadian Social Security" Without living, working or even traveling to Canada... Americans have begun collecting "work-free benefit checks" by piggybacking Canada's "old-age" retirement plan. It's completely legal... click here for the details. Rude Numbers When to Buy... When to Sell 29 points were added to the Dow Jones Industrial Average to start the week. Once again, the major averages are sticking to a tight trading range... $60.92 buys a barrel of crude today. Oil is rocketing back above $60 with a vengeance. It's up more than 1.2% this morning... $1,194 is where you'll find gold futures this morning. The yellow metal is up almost $5 to start the day... $2.64 is the price of natural gas today. Natty is stuck well below $3 after its two-week swoon... 2,103 marks the spot for S&P futures just before the morning bell. Stocks are set to open lower this morning after Monday's weak close... Rude Trends When to Buy... When to Sell "Greg, times have changed and so has research," a reader scolds. "KFC does not cause artery clogging, look it up. I am not an apologist for KFC and I must say, if they use organic lard, not hydrogenated, then this chicken is not that bad. I can't speak for the chicken itself. However, do your due diligence." Maybe profiting from the death of a chicken empire just isn't your style... But hey, you're probably right. I'm not a health expert. But what's more important than the oil KFC uses is the perception that the food just ain't good for you. I'm guessing that a fully-loaded Chipotle burrito is far fewer calories than a couple of pieces of fried chicken. But Chipotle goes out of its way to talk about the quality of the meat it uses and presents its food as a fresh alternative. Whether it's true or not, this strategy certainly is working--while KFC struggles to maintain its identity. [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner] Ignore At Your Own Peril Today's Must Read Links JFK Assassination: New Evidence Underground Bank Could "Kill" Your Local ATM World's Most Valuable Tech Companies for 21-Cents? BE SURE TO ADD rude@agorafinancial.com to your address book. Additional Articles & Commentary: Join the conversation! Follow us on social media: The Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial delivering daily email issues and advertisements. 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