The Investing Starter Guide
Robin R. Speziale
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Published by Robin R. Speziale at Smashwords
Copyright 2012 Robin R. Speziale
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Author of Lessons From The Successful Investor:
Lessons From The Successful Investor is the new investing classic of our time. With thousands
of downloads, this new investing eBook has topped bestseller lists across major digital book
stores and has received rave reviews. Now available for only $4.99. The new investing classic
contains 85 timeless lessons to help you build a quality portfolio of value stocks that will make
you wealthy.
Reader Reviews - Lessons From The Successful Investor:
“This book is an absolute must for all new and inexperienced investors”
“This book has given me the confidence to be able to manage my own portfolio”
“I downloaded your book and could not stop reading it until the end”
“I have been reading many books on investing in the last while and by far this has provided the
most insight”
“I have the Ben Graham book but you have made it make sense”
“Incredibly informative and really motivated me to drive the inner investor I always knew was
inside me”
"Finally a book with easy to follow stock principles"
Other Titles by Robin R. Speziale:
The 85 Investing Lessons
A Brief Stock Market History
The Investor’s Checklist
The TFSA Guide
***
Contents
INTRODUCTION
Chapter 1 - THE IDEAL INVESTMENT

containing 85 timeless lessons to help you build a quality portfolio of value stocks that will make
you wealthy. Once you finish reading this eBook, I hope you download the original Lessons
From The Successful Investor and find out for yourself what aspiring value investors around the
world are raving about and profiting from.
***
Chapter 1
THE IDEAL INVESTMENT
“Simplicity is the ultimate sophistication.”
Leonardo da Vinci
1: Finding the Ideal Investment
The successful investor would compile a scorecard for his ideal business such as the one
compiled for Company A above. Before compiling such a comprehensive scorecard, however,
the successful investor filters stocks based on initial value benchmarks, such as P/E, P/S, and
M/B. Once qualified stocks are returned, the successful investor scours this list for businesses
with ideal underlying fundamentals and clear competitive advantages. For example, from the
340 businesses returned from the filter, the successful investor only developed a scorecard for
five. Company A’s scorecard above then is his most ideal business from his top five. Moreover,
the fundamentals contained in Company A’s scorecard paint a comprehensive picture of its
underlying business. On the income statement, its revenues are growing, its profit margin is
consistently high, and its earnings per share are growing consistently. On the balance sheet, its
cash holdings are healthy, its current ratio is ideal, its long term debt is low, its book value is
growing consistently, and its return on equity is consistently high. Regarding stock valuation, its
market capitalization is growing, its P/E valuation is ideal, and both its dividend payout and yield
are consistently growing. Clearly, the successful investor would have wanted to invest in
Company A during 2008 while its P/E was at a low of 10.5. However, because of Company A’s
consistent growth, quality fundamentals, and clear competitive advantage, the successful
investor would invest in Company A with its current P/E of 16.48. Company A is deserved of its
slight P/E premium.
Visit the Value Line site for free scorecard reports
of the 30 businesses contained on the Dow. Study these scorecards carefully and you will

Blu-ray’s can be copied multiple times at rapid pace. Further, pay-per-view, such as Astral
Media’s TMN channel, is now more prominent, where viewers can order movies with the touch
of a button, without a DVD or Blu-Ray system. What needs to hit home then is that an investor
who believes an investment is ideal today needs ask himself whether that same investment will
be ideal tomorrow. A business that possesses stellar fundamentals today may not tomorrow if
its competitive advantage is threatened by technological advances. The quality business must
evolve with advances in technology in order to deliver long term investment return.
4: Some Great Stocks are Terrible Businesses; Some Great Businesses are
Terrible Stocks
“Some great stocks are terrible businesses” is true when one finds a stock, trading with low P/E,
P/S, and M/B multiples but its underlying business is shoddy, with no growth potential or clear
competitive advantage. “Some great businesses are terrible stocks” is true when one finds a
great business, chalk with growth potential, solid fundamentals and clear competitive
advantage, but is trading at terribly high P/E, P/S, and M/B multiples. Further, the successful
investor never invests in low P/E, P/S, and M/B stocks that are terrible businesses but will
occasionally invest in great businesses with fair P/E, P/S, and M/B valuations. For instance, the
successful investor first measures a business’s underlying fundamentals, and if he is then
convicted in its long term growth and competitive advantage, he invests in its slightly inflated
stock but never invests if its P/E is over 20, its P/S is over 4, or its M/B is over 5.
Case Study: Some Great Stocks are Terrible Businesses
Bell Canada, or BCE, is a great stock. As of July 21, 2010, its P/E was 13 while its dividend
yield was 5.54%. However, the successful investor knows well that Bell is a terrible business.
For example, his cell phone plan was once will Bell, and their customer service was deplorable.
Further, Bell Canada stands to lose considerable market share into the near future. Firstly,
Canadians are increasingly discarding their landline phones, instead adopting mobile phones as
their primary phone. Secondly, the recent Canadian wireless spectrum auction helped many
new players enter the wireless industry. Currently, Bell is a great stock, but a terrible business.
Case Study: Some Great Businesses are Terrible Stocks
Amazon is a great business. It possesses an immense network across North America, sells
virtually every book, prides itself on its customer service, and is a rich resource for book

his stock holdings by investing in a few core stocks – 7 to 30 – to then holds those stocks for the
long term. The common investor who diversifies into hundreds of stocks inevitably incurs low
returns. It is as if the common investor concedes in himself that he cannot pick quality stocks so
he simply picks many stocks hoping some work out. Portfolio diversification runs rampant
because financial institutions profit from diversification and thus promote it. Diversification into
“safe investments” equates more brokerage fees and fewer lawsuits. Further, so called experts
compare market risk to individual risk in order to support their argument for diversification. They
will tout that by investing in many stocks, the common investor eliminates the individual risk of
each. For example, if in 2010 DragonWave generates negative stock return because of
corporate malfunction, whereas Starbucks provides positive stock return, the portfolio does not
suffer. DragonWave’s individual risk is effectively mitigated by Starbucks. With many stocks, the
experts lavish that only market risk threatens the common investor. Market risk is general panic
that would in theory negatively affect all stocks in ones portfolio. However, if the investor’s goal
is to eliminate individual risk by blatantly diversifying into stocks, many of which he can do
without, he does not trust his ability to invest in quality businesses. The successful investor
simply invests in a few core quality businesses and owns those businesses for the long term.
7: Asset Allocation vs. Capital Allocation
The majority of investing professionals claim that investing strategically into asset classes
maximizes returns. Asset classes are represented by stocks, bonds, and real estate, among
others. Apparently, 50% of one’s capital should be invested in stocks while the other 50% in
bonds. Those allocated assets should then be re-balanced to compliment ones risk adverse
profile in old age, such that at age 70, for instance, stocks should only represent 30% of one’s
portfolio while bonds 70%. To stress, the successful investor does not invest based on asset
allocation. Only average returns are got by blindly investing in a framework that necessitates
constant rebalancing. Instead of allocating assets, the successful investor allocates capital. The
successful investor is knowledgeable in stocks, bonds and real estate. Adhering to the rules of
asset allocation, the successful investor allocates his capital to the asset class at that moment in
time which will most likely generate greatest return. For instance, in 2008, house prices
declined. If the successful investor found cheap real estate more valuable than cheap stocks, he
allocated his capital to real estate. However, the successful investor generally strays from real

throughout the year for stock purchases, the successful investor conducts a stock screen on the
S&P 500 and S&P/TSX to filter attractive stocks of quality businesses. If attractive stocks are
found, he will purchase those stocks, if not, he will reinvest in current holdings. The successful
investor does not succumb to investing in hundreds of businesses. He manages a focused
portfolio of about 7 to 30 businesses with clear competitive advantages, and only adds
businesses that will maintain his portfolio’s average profit margin and return on equity. Logically
then, he does not erode his portfolio’s value. The successful investor does not check his
portfolio daily; for he knows his businesses are running smoothly and are constantly building
shareholder value. Quarterly, however, the successful investor checks his portfolio for dividend
income earned from the businesses he owns. This makes him happy and proud owner of these
successful businesses. Moreover, the successful investor dislikes very much selling his quality
businesses. If a quality business generates consistently growing income, why should he sell that
business? However, the successful investor does sell a business when its underlying
fundamentals deteriorate considerably, pulling down his portfolio’s profit margin and return on
equity to historical lows. However, the successful investor is o.k with holding good quality
businesses, for he knows his great quality businesses maintain his portfolio’s high returns. If he
were to sell every great quality business that turned good quality, he would incur significant
brokerage costs. Only quality businesses that are deteriorating significantly are sold. In all, the
successful investor invests in quality businesses with clear competitive advantages, reports on
their performance, builds his stake in those quality businesses and invests in new quality
businesses annually, watches his dividend income, not stock prices, and in turn, becomes
wealthy.
10: Portfolio Insider
If you would like to know what stocks Warren Buffett’s Berkshire Hathaway invests in, you can,
by obtaining its 13f filing. You can obtain Berkshire Hathaway’s 13f, for instance, by visiting
secinfo.com, signing up for free, and searching for Berkshire Hathaway in its database. For your
reading pleasure, included below are Berkshire Hathaway’s current holdings as of May 17,
2010. The successful investor would study each holding below and assess for himself whether
each business Buffett invested in is a quality business. For even investor giants make mistakes.
Berkshire Hathaway Equity Holdings (May 17, 2010)

shares he can buy in each business with the capital allocated. The following stock prices are
current as of July 10, 2010.
Wal-Mart. $49.43. $1966.40/$49.43 = 39.78 shares
Johnson and Johnson. $60.54. $1474.80/$60.54 = 24.36 shares
PepsiCo. $63.50. $1474.80/$63.50 = 23.23 shares
Pertaining to the calculations above, the investor cannot purchase partial shares so he must
round off the number of shares of each stock. Thus, Wal-Mart’s 39.78 shares become 40,
Johnson and Johnson’s become 24 and PepsiCo’s become 23. The investor will place a buy
order for each stock, inputting number of shares desired. After confirming all three stock
purchases, the investor now possesses a starter portfolio. He will immediately create an initial
portfolio report, as shown below:
To calculate annual dividend for each stock, the investor simply multiplied dividend yield by
stock price. So for Wal-Mart, its annual dividend is 2.45% x $49.43, which is $1.21. Finally, to
calculate annual dividend income for each stock, the investor multiplied annual dividend by
shares owned. So for Wal-Mart, $1.21 x 40 gives $48.40, its annual dividend income. In total,
the starter portfolio returns annual dividend income of $144.40, 2.9% of the portfolio’s current
value. Also, the starter portfolio’s average profit margin is 12.67% while its average return on
equity is 28%. Indeed, the investor’s starter portfolio consists of quality businesses. In year two,
if the stock valuation of each business is fair or undervalued, the investor will consider investing
more capital in each, unless better opportunities are found in the stock market.
***
Chapter 4
SUCCESSFUL MENTALITY
“The three great essentials to achieve anything worth while are: Hard work, Stick-to-itiveness,
and Common sense.”
Thomas A. Edison
12: Who Can Invest Like the Successful Investor?
If you have a) available capital b) an investing account and c) common sense, you can invest
like the successful investor. However, only a minority of those adults that satisfy a) and b) will
satisfy c) common sense. And unfortunately, because the majority lack common sense, they

13: Inside His Mind
At University, while everybody else was tracking sports stats and reading sports headlines, the
successful investor was tracking stocks and reading annual reports. Clearly, the successful
investor was as passionate for stocks as the average guy was passionate about sports.
Logically then, one must want to make money and be wealthy in order to think as the successful
investor does. Moreover, the successful investor studies diligently investing and business, and
he stays always curious, making sure to learn all he can. Further, once the successful investor
spots a positive trend, such as business people retaining their BlackBerry’s instead of trading
them in for iPhones, he sees dollar signs. The successful investor then invests in RIM because
he is sold on what he sees, not what he is told. A fourth grade teacher from long ago had an
excellent saying: “don’t tell me, show me”. The successful investor also takes pride in his
portfolio. He likes to think about his money growing. He also likes to see consumers enjoying
products from the businesses he invests in. And he especially likes the dividends he earns.
Case Study: Buy Antique Furniture
There exists an interesting story about the wealthy. In a nutshell, the wealthy buy antique
furniture to furnish their house, largely avoiding IKEA. Why? IKEA furniture depreciates while
antique furniture appreciates. Certainly, antique furniture provides ultimate utility; usage, value,
charm, and appreciation. Appreciation versus depreciation highlights an important divide of
mentality between the successful and common investor, wealthy and poor man. The successful
investor and wealthy man alike acquire more assets that appreciate. Equities appreciate. Real
estate appreciates. Antique furniture appreciates. The common investor and poor man alike,
however, acquire more assets that depreciate. The $120,000 BMW starts to depreciate as soon
as he drives it off the dealership’s lot. It isn’t that perplexing then that the wealthy within a
capitalistic system are called capitalists? Capitalists acquire capital, appreciating assets. Those
who are not capitalists own the debt in an economy. The poor are the anti-capitalists, or rather,
depreciationists.
14: Goal of Investing
Clearly, the successful investor’s goal is to make money. If any investor says different, they are
not making money in the stock market. To apply a numerical value, the successful investor
seeks to beat annually the S&P 500’s total return by 5%. However, once the successful investor

17: Real Ethical Investing
It is survival of the most adaptable under a capitalistic system. As a result, businesses will
compete, jobs will be cut, and bankruptcies will occur. This reality seems unethical, but because
we participate within such a capitalist model, we must accept it as ethical. Instead, the
successful investor deems business’s unethical selectively, such as what he did with BP. BP’s
Gulf of Mexico off shore rig exploded in 2010, leaving twelve dead and an oil well gushing. But
BP was slow to react and apologies were muffled. As of July 12, 2010, Gulf of Mexico’s price
tag for oil damages totalled $3.5 billion dollars, an amount that will surely increase into 2010. As
a result of the significant costs incurred, BP announced the sale of some of its assets and cut its
dividends for three subsequent quarters. BP also announced a fund where management will
allocate $20 billion to for future oil spill payments. Moreover, BP’s stock plummeted from $60 to
$27 following the oil explosion and subsequent spill. However, BP’s stock quickly rebounded;
signalling investors were picking up its remains like desperate vultures. The successful investor
simply does not understand why investors, mainly American ones, would invest in a business
that was devastating American coastlines. This is irrational. However, greed can be
overpowering. Moreover, it is already clear the successful investor would avoid BP simply
because it is a capital intensive business. However, because BP committed a crime to
humanity, the successful investor would certainly not move to profit from BP’s depressed stock.
He likes to sleep well at night. To close, the successful investor learned real ethical investing
from what Abraham Lincoln said about religion: “When I do good, I feel good; when I do bad, I
feel bad, and that is my religion”
***
Chapter 5
COMPOUNDING WEALTH
“We must use time creatively.”
Martin Luther King, Jr.
18: The Compounding Effect
To Albert Einstein, compound interest was the most powerful force in the universe. And
because Einstein was intelligent, the successful investor naturally shares his belief. Compound
interest is like a snowball rolling down a snow covered hill. As the snowball rolls, it picks up

return and dividend yield. Thus, a portfolio consisting of dividend stocks requires a reinvestment
policy. The successful investor simply reinvests his annual dividend income in existing stock
holdings or in stocks outside his portfolio. From 1960 to 2009, the S&P 500’s average dividend
yield was 3.17%. To stress, a dividend yield of 3.17% would return $32,254.58 from the
aforementioned $1,017,494.63 portfolio.
21: Time Value of Money
The compounding effect and time value of money are two concepts that intertwine. Simply, time
value of money means that $1 dollar today is worth more than $1, since that $1 inevitably
possesses a higher future value. With that in mind, if you are thinking of buying a BMW at age
22 for $44,000; remember that because of time value of money, $44,000 today is not $44,000
tomorrow. Warren Buffett is said to have calculated the future value of his present spending
habits, effectively cutting out some small costs because those costs, however small, would be
worth more in the future by investing them instead and enjoying the magic of compounding
interest.
***
Chapter 6
RECESSIONARY INVESTING
“Every crowd has a silver lining”
P.T. Barnum
22: 10 Tips for Investing During a Recession
1. Buy stocks on sale. When a recession hits, investors pull out of the stock market. This leaves
you the opportunity to pick quality stocks on sale.
2. Ignore the Media. The Newspaper industry sells more newspapers with negative headline
news. Naturally, the media will pump fear into you. Ignore this fear, and invest in stocks.
3. Remember, the economy will bounce back. Have you ever been sick and thought you would
never get better? That is how people think during a recession.
4. Even if the stock market keeps on tanking after you invest, the dividends from your stocks will
make you comfortable. RBC sent the successful investor a $1000 dividend cheque per quarter
during the recession.
5. If you cannot stomach a 50% loss, do not invest in the market. At the nadir of the financial

Chapter 7
FUNDAMENTAL EQUATIONS
“Before all else, be armed.”
Niccolo Machiavelli
25: Two Overarching Equations
Investing Success = f(B,D,Q,L), “Investing Success is a function of (B,D,Q,L)”,
Where:
B = Behaviour (calm in boom and bust periods)
D = Discipline (investing in low P/E, P/S, M/B stocks)
Q = Quality (investing in competitively advantaged businesses)
L = Long term (investing for the long term)
Business Success = f(EG, ROE, PrM, CA), “Business Success is a function of (EG, ROE, PrM,
CA)”,
Where:
EG = Earnings Growth (growing consistently)
ROE = Return on Equity (consistently high)
PrM = Profit Margin (consistently high)
CA = Competitive Advantage (timeless)
26: Equation Glossary
Stock Valuation
P/E: Stock Price / EPS (earnings per share)
P/S: Market Capitalization / Revenue
M/B: Market Capitalization / Book Value
Market Capitalization: Common Shares Outstanding x Stock Price
Dividend Yield: Annual Dividend / Stock Price
Unlock Cash: Real Stock Price = Actual Stock Price + (Cash per Share – Long Term Debt per
Share)
Business Valuation
Profit Margin: Net Income / Revenue
Book Value: Total Assets – Total Liabilities