Here are 25 Sensible Stock Investing “rules” for individual stock investors.
--1. Remember Buffett’s Rule #1: Don’t lose money. Maintain a fiduciary duty to yourself.
--2. Pick only excellent companies to invest in. Avoid the ones with major flaws.
--3. Determine a rational value for any stock you are considering. Always try to buy at an advantageous price.
--4. Learn the difference between investable trends and noise in the market.
--5. Don’t get stuck in one way of thinking. In investing, as in life, seek balance.
--6. Remember that a 50% loss followed by a 100% gain equals zero. How likely is that 100% gain? If it is improbable, avoid the 50% loss in the first place.
--7. Manage your portfolio intelligently. Investing is not a set-it-and-forget-it activity.
--8. Any investment in the stock market carries risk. Learn how to manage it.
--9. Do everything you can to stack the odds in your favor.
--10. Read, analyze, and do your own thinking. Always keep learning.
--11. If you are interested in a company, write out its ''story'' in a few sentences. If you can’t understand it enough to do that, don’t invest in it.
--12. The tortoise usually beats the hare over the long haul.
--13. Stocks don’t all go up and down together. Find the ones that are going up.
--14. Over the long term, stock prices follow corporate earnings. Look for companies with good prospects for sustained earnings growth.
--15. The market is rational over the long term and rewards sensible investing.
--16. Invest in dominant companies. They will be able to sustain earnings growth.
--17. Don’t trust management which has demonstrated lack of integrity.
--18. Investing should be fun. Don’t put your money into companies who make or do anything you don’t admire.
--19. Beware of companies with lots of debt. It’s as hard for them to handle as it is for you.
--20. Like—maybe love—dividends.
--21. Run your investments like a business: My Investment Company.
--22. Come at investment decisions from several angles for the best results.
--23. As in poker, the best investors gain the most with their good hands (stocks) and lose the least with their bad ones.
--24. Know your goals and construct strategies to reach them.
--25. Don’t be afraid to have some of your ''stock money'' in cash.
David Van Knapp is the author of Sensible Stock Investing: How to Pick, Value, and Manage Stocks. If you would like to learn about a comprehensive stock investment approach that that uses the same strategies reflected in this article, please consider purchasing Sensible Stock Investing: How to Pick, Value, and Manage Stocks. Visit our website at http://www.SensibleStocks.com to learn more about the Sensible Stock Investing approach and to purchase the book.
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