The Most Important Investment Rule

[00:01] Are you sure, Mr. Hussein, of this boy? is that I am not a traditional businessman or billionaire. I have a different personality.

[00:15] In particular, the young man, Saeed. that stole his house and killed his children, I must invest in this young man's ideas. Do you hear me?

[00:31] Sorry, sir, but what does this have to do with investment? our sir and boss, lookin' good! doesn't receive respect.

[00:46] If you have any ideas at all. investing in companions, Amazing!

[01:00] he means we should stay away from agricultural investments. Amazing! Continue, Saeed, say. I can tell you what I learned from my journey, and what I adopted.

[01:17] and the traitor stays up until the morning. Do you understand what he means here? Indeed, this market is falling down. Excellent!

[01:31] He only says bad proverbs. Tell us, Mr. Saeed, what investment are you here for?

[01:43] I'm here today, sir, and buy the family house and the workshop that belonged to my father. Great. I agree.

[01:58] You forgot the last member of the gang.

[02:10] Do you think I'm a fool? fake metal doesn't shine brighter. He means Bitcoin.

[02:25] I gave up. And the workshop?

[02:39] ChatGPT, my friend, has reached 100 million users in less than 3 months, TikTok, my friend, that takes away your sleep, took almost 9 months. Suddenly, the world said to you, "Wow, what is this?

[02:54] It seems like it's the future! Come on, invest, invest! it is clear AI will create an information revolution, just as the Internet did!" Investors, my friend, when they first saw the AI glimmer, they did not wait.

[03:08] in OpenAI that made ChatGPT. OpenAI is now valued at $30 billion! BuzzFeed announced in January 2023

[03:22] And bam, the stock rose 150%! "Hey investors, by the way, we are an AI company! if we are not an AI company, we use AI in everything we do!"

[03:36] the number of times the word AI has been mentioned over the past 10 years. in the number of times the word AI is said or something related to AI,

[03:49] A company like Nvidia, its stock is up more than 400% so far, in a day, the company's value increased by $184 billion...in one day! This was added to the value of a company in just one day.

[04:04] talking about investing in billions and 400% opened my soul to investing. Abo Hmeed, I will put my money in AI companies and benefit from the revolution. or 13,000%, just as with Tesla, because of the electric car revolution,

[04:21] or 204,000%, just as with Amazon because of the Internet revolution. First, you don't have the money to buy a bundle My friend, you do not know the real face of El-Daheeh until now,

[04:33] I'm joking with you, my friend, you have money. But don't rush. how can you benefit from this?

[04:45] But, my friend, let me surprise you, is one of the biggest misconceptions in investing. one of the greatest, if not the greatest investor in history,

[04:58] in 1999, he was talking about the car industry. He talked about how the car industry was a revolutionary and very important industry, Today, my friend, the city is designed for cars.

[05:12] Not according to your size. when this industrial boom was happening, If you were as excited as you are right now,

[05:27] that indeed, my friend, will change the world. No, this is a revolution in technology, and a revolution in industry.

[05:39] you'd have gone broke, and you'd be watching me on 144p. My friend, this is a well-known phenomenon when the English, my friend, were obsessed

[05:54] They invested and poured attention, We saw it again, when the English were obsessed with railways in the 19th century.

[06:06] then, there was a bubble, and then a collapse. when the whole world was obsessed with small internet companies then, we saw a bubble, and then a collapse.

[06:21] that Warren Buffett was predicting in 1999. When we see companies like Pets.com, At that time, when there was a large, well-known,

[06:37] its name is "Amazon", and at that time it lost 95% of its market value. Today, Amazon is worth more than a trillion dollars. Even the Nasdaq index, which includes the most important technology companies,

[06:52] Here, my friend, again, we are talking about very important industries. The manufacture of trains that connect cities The Internet industry, which will connect the world together,

[07:08] They're not false bubbles, say, "Don't be attracted to important industries On the contrary, stay, my friend, and hear this from your brother.

[07:21] a professor of finance at the Wharton School, University of Pennsylvania, competing with Harvard. that actually if you invest in a dying industry,

[07:38] Let me, my friend, explain to you with an example. -the index that includes the best and largest 500 companies in America- 63% of the 500 largest companies in America,

[07:54] This rate kept declining, my friend, until it reached 1% in 2019. from 63% early last century, to 1%.

[08:08] you would have made more money than if you had invested in air transport, For you, my friend, to get on the plane and close your eyes, this is a breakthrough your ancestors never dreamed of.

[08:23] you would have made more money than if you had invested in the entire S&P500. and you are just trying to stir up controversy." Let me ask you a question, my friend,

[08:37] and asked you, will you put your money in software companies, "Of course, Abo Hmeed, I will choose the software industry, but electric vehicles will replace the need of oil."

[08:50] in software companies in 1971, "I was right, Abo Hmeed!" If you, my friend, had put that same dollar into oil companies,

[09:06] nor does the world, or the environment, or any one for that matter. People were investing left and right to find renewable energy sources. If you had invested in this miserable, late-stage industry,

[09:19] your dollar would have been 134 dollars in 2019. What I am telling you, my friend, conveys a very, very important meaning. Successful investment is not necessarily mean the highest value,

[09:33] at a price higher than its value, you will lose. at a price lower than its value, you will earn. So yes, the software industry is important, beautiful, and revolutionary.

[09:46] because everyone knows that it is important, beautiful, and revolutionary. and industry such as the petroleum industry, often its price is lower than its real value.

[10:00] I'll exit in Cashback and come in Cashflow and explain. or you want to invest, so you can increase the size of your money. you are the one who took me as a bridge to explain what you wanted."

[10:14] Let me, my friend, explain to you how you can invest, The first scenario is if you buy Index. over the past 100 years, approximately earns 10% per year.

[10:29] this is called Passive Investing. No, I will buy an ETF, this is passive, meaning without effort.

[10:43] go to Index, put your money in, and thank you. The second scenario, my friend, is to give your money to someone knowledgeable who is very smart in finding companies that are worth more than their price.

[10:59] This man, my friend, his money increases on average And you can, my friend, if you want to invest with Warren Buffett,

[11:11] and then you will get the same profits as this man. There are other people, like a company called Act, located in Egypt. make reforms in it, change stuff,

[11:27] They did this for example with Sodic, According to some sources, their average annual return on investment is 50%.

[11:39] And of course, my friend, there are many examples. you depend on giving your money to someone knowledgeable. To the point that they keep making money while the market is down.

[11:53] but his numbers are perfect, and not affected. they weren't going to fall more, because that was their rock bottom. or can reach this understanding.

[12:07] We have, for example, a famous investor named Stanley Druckenmiller. his capital increased by 30% on average per year. At the end of every year, the man emerges as a gainer.

[12:22] And there is a third scenario, my friend, rely on yourself in the hope that you make more profits than the S&P500. you chameleon of narratives,

[12:37] who told me that Warren Buffett and all the big investors why do you tell us we can give the money to a smart investor, Honestly, my friend, I am telling you all this for several reasons:

[12:52] but there are some respectable opinions that says, "Take care, folks, this doesn't have to always be the case." or are they your friends, and you're doing them a favor?"

[13:07] Head of Queens College in University of Cambridge, because he's your friend, and you're both campaigning for the same companies!"

[13:19] nor would I be making a show on YouTube. Anyway, my friend, Dr. Muhammad Al-Erian sees it is not the best -in his opinion- He sees that the coming period will be the era of Smart Money.

[13:36] in places that deserve to take money. "Is that your next commercial contract, Abo Hmeed?" who manages more than 29 billion dollars.

[13:51] Let me tell you that the most important thing to know about Klarman, says that if he retires one day, who will let them manage his money.

[14:05] I'm just trying to give him a blue badge, so you know that his words are important. Not only that, we see the reports of some companies, saying that the S&P 500 will not earn you during the coming period,

[14:22] Do they have any information? or is this personal judgement?" There are people who think, "Continue with Passive", One of the reasons people say, "Don't continue with it",

[14:36] "How expensive, Abo Hmeed? The truth, my friend, is that it's not that simple. to say that a particular company is expensive,

[14:48] This, my friend, is the This means that the company's price is divided by its profits. This company has a market value of $100.

[15:02] The P/E of this company is 100 divided it by 5, leaving it at 20. this means the company is 20 times the value of its profits. and divided their values by their profits to find the P/E of the S&P500.

[15:19] Abo Hmeed, is this expensive or cheap? So I know how to react." If you, my friend, compare this number with the rest of the world, You will find, for example, a country like China, with its companies and technologies,

[15:34] A country like Qatar has 11, a country like Egypt has 10. My friend, we are talking about the important Ratio, not Monopoly. Not only that, my friend, if we compare the P/E Ratio of the American market today,

[15:50] to the historical P/E ratio of the American market, we find it at 15. Throughout history, the P/E Ratio of the S&P 500 has been 15, Since it has now reached 28, this means that it is extremely expensive.

[16:06] P/E 28, my friend, means you need 28 years to return the value of your investment, this is a very long time. then rent this same apartment for 10 thousand pounds,

[16:20] According to what some analysts say, this is a very high price. Yes, the American market is growing and AI and developments and deals, It and the Indian market, by the way, the Indian market is almost 24 or 25.

[16:35] This, my friend, is a simplified and sufficient explanation for you from me. "Economic Expert" I'm joking my friend, it involves tons of money and this is oversimplification.

[16:47] about whether the companies we look at or invest in are expensive or not. "We sniff around companies whose P/E is low,

[17:01] for example, if our company has a P/E of 1, this means that the company's profits will meet its price in one year, so I'd double my money, who's Mohamed El-Erian now?"

[17:13] To be honest, my friend, the step of investing your money yourself And by choosing a very low P/E, the best thing is if you put your money in Index,

[17:27] If you, my friend, want to take the risk -and again, there are risks, of course- to the Valuation Science, the science of valuation.

[17:42] and see if its price is more than its value, or its price is less than its value. is that shares are your right to the company's future profits.

[17:56] the trickery and cleverness here That is, to buy a pound for 50 piasters, when I invest in companies, I'll choose large companies,

[18:10] Of course, my friend, this is a good choice. You must be right, and many people are wrong. If you will profit from the stock you bought,

[18:23] Your profits are, in one way or another, other people's losses. That's why, my friend, Warren Buffett has a famous saying, Because if all people agreed

[18:38] that there's a certain company that is good, making profits, and is important, So when you go buy it, it would be expensive. you can never earn from it.

[18:50] named Aswath Damodaran, He has some nice books. If you want to learn the science of valuation, can earn you money as long as you buy it at a price lower than its value.

[19:06] Any business, my friend, according to what he said. I will go and look for companies whose P/E ratio is low And so I'm right and all people are wrong!

[19:23] and I'd the greedy one, when all people are afraid." The idea you're saying is kind of a good idea we will notice something, from 1966 to 1982,

[19:41] The price of this index reflects the prices of the companies below it. This indicator has been stable for approximately 16 years.

[19:53] after 16 years, you will get 1000 pounds. if you had put 1000 pounds in companies that have a low P/E ratio,

[20:05] The market is sleeping, it is not moving, you multiplied your money by 10. The P/E, my friend, reflects the investors' view,

[20:20] will not be able to increase its profits. is that in your normal life, the more opportunities you have are better.

[20:32] But if I took you to a restaurant and said "You will eat the best fish of your life". "This is the greatest movie you will see in your life." When eat the fish, you'll say "Is this the best fish?"

[20:47] come, let us meet a person who is irritating, not funny, and pessimist. Although again, if I had told you he was he's a good, beautiful, respectful and kind person, and all these words,

[21:01] you would get upset and feel, "What? I'm so frustrated." are companies where no one has set expectations. So when you decide to do something like this,

[21:13] My friend, methodically thinking poof about the company's prices, and Price, I don't know, Pre-Book is low, and Price Pre-Sales is low,

[21:25] it's obvious but from far away We buy companies whose valuation is low. He tries to buy a company when it as already head rock-bottom.

[21:42] it would be worth it, for example. we are at the bottom of business. Warren Buffett used to describe it, in his early days, when he was investing, Of course he changed after that, and was looking for;

[21:56] always think about risk. who heads one of the largest investment institutions in the world, Because if you lose 50%,

[22:10] in order to get back to where you were, you need 100%. This is a school known as Value Investing. We buy cheap things that can be cheaper.

[22:26] There are, my friend, on the other hand, people who criticize this method. or its evaluation is low in every thing, That this company will not be able to grow its profits

[22:41] Therefore, we will not be able to make profits from it. Or is there a company that will only preserve the value of the money, Secondly, my friend, we have begun to see

[22:53] Companies that call their stocks Growth Stocks, sometimes we see that its P/E Ratios are very high. They actually make gains and increase capital

[23:06] Value investors make less money today than Growth investors. Companies like NVIDIA, Tesla, and other companies that are growing, While cheap, stable companies,

[23:20] these companies, in the last 10 years, The debate between the two philosophies is a very fierce debate. companies whose P/E ratio is lower.

[23:34] do better than companies whose P/E ratio is high. Will it stand the test of time or will it change? We don't know. "Okay, Abo Hmeed, I'm lost. I mean, should I go Value or go Growth?

[23:48] Honestly, my friend, these are all names and designations. you need to study your company well. Of course, my friend, it is important that you look at things like the P/E Ratio.

[24:01] he says, Valuation is not just a number. It is never enough to look at numbers, such as the P/E Ration or anything else, you must do what is called Fundamental Analysis.

[24:15] See how much this company spends and how much it makes, What are the company's assets, and what are its debts? then, the qualitative analysis comes,

[24:29] what distinguishes this company from its competitors? Do they still have shares in it, haven't they sold it for example? it's alarming.

[24:41] Qualitative, my friend, is very important, because you may have a company whose P/E Ratio is as high as 60 or 70. you may find this P/E Ratio justified,

[24:53] It may be able to increase its profits multiple times every year. and a profit of million, "Of course it is expensive, Abo Hmeed. 100 is too much."

[25:08] of course, 100 is a lot in absolute terms. and does something very special, and its profits are expected to increase every year by 500%.

[25:20] Next year, my friend, this company will make profits of 5 million, After two years, my friend, if the price remains the same price, Next year's P/E Ratio, if it remains at the same price, will be 20.

[25:36] It'd then be a cheap company, buy! and to do this Qualitative Analysis. the best person I know in my life is Atef Magdy, my primary school teacher,

[25:51] First of all, my friend, you have some important sites, these sites, and many other sites, You can understand a specific industry.

[26:06] And who makes gains from whom? to try to communicate with people in companies. or in Abo Qir Fertilizers, or Salik in Dubai,

[26:18] to do investigative work that allows me to understand this business and its ambitions. Companies are productive assets, You need to have a good understanding of how your investment

[26:34] in the future, and more. Remember, my friend, the immortal words of Warren Buffett, It is very important that the price you pay is less than the value you will receive,

[26:46] In the end, my friend, investment is a very important thing. It is important so that you can make an income when you get older. Wealth is derived from property.

[27:00] your wealth will be greater. Non-productive assets, meaning gold, Bitcoin, or antiques. An ounce of gold will not be an ounce and a quarter next year.

[27:14] These are things that resist inflation, but they do not necessarily earn you money. Money in things like gold, Bitcoin, currencies, or all that stuff, Not only is investment important for individuals, for us,

[27:28] If I saved money in gold, dollars, or any local currency, or Bitcoin, But if I go to the market and buy shares in companies, Industries that employ local workers, and may be able to export abroad.

[27:44] So, my friend, investment is important to you on the individual level, directly, To make a sound investment, You need to understand the business that you are literally going to be a partner in.

[27:56] If you are a partner, you must understand what you are buying, Be aware, my friend, of being carried away by fashion or sweet things that bling, and know that its value is still much greater than its price,

[28:11] the advice of most investors in the world is to buy the Index. and feel that the things I said are logical,

[28:23] May God honor us, provide for us, and make us possessors of wealth. Do you know, my friend, that approximately one hen lays an egg a day?

[28:37] You'd leave an egg from the chicken you are slaughtering, Chicks grow up, be chicken, chicken lay eggs. That's it my friend, last but not least,

[28:51] check the sources below, and subscribe if you're on YouTube.