Keep the following 15 rules in mind that could help you hold your head high in times of sudden losses or for general investing purposes:
1) Think twice protecting against the downside (price downs), before daring to look up (price ups) when picking shares.
2) The norm is "Volatility does not represent risk, but creates opportunity". This is true. But go through the numbers (financial statements) and decide on your free will.
3) Investing when a share is neglected or out of focus is the best. The prices will be low and will produce you with enough gains in the long run.
4) Buy companies with excess cash flow.
5) Watch out for value, then make sure the basic figures tell you a clear story about the future of the company.
6) When digging further, use a Warren Buffet-like discounted cash-flow method to help determine underlying value.
7) Ask yourself if you're prepares to buy the whole company for yourself if you could. If the answer is 'NO', probably you should move on.
8) Don't fall for the reputation of the company or the centuries of years it has been in existence. The market has numerous examples for incidents where such companies have fell overnight. Always look at the current performance.
9) Don't listen to the directors if the reports show a complete over turn. If the numbers do stack up, take what the directors say with a healthy dose of salt. The same goes for brokers' forecasts.
10) If directors are buying shares, keep your eyes open.
11) No matter how hard you try and no matter the market condition, you will make losses. Accepting that will ease your pain. The general norm is that in stock trading you should always be prepared to take 20% loss anytime.
12) Make sure you understand how the company makes its profits and the essence of what it does.
13) Stick to your investment strategy. Pay less attention to market gossip and hush hush..
14) John Maynard Keynes said: "The market can stay irrational longer than you can stay solvent". But this is only true if you've overdone it. Don't invest more than you can truly afford to lose. (Margin trading is really not necessary)
15) Last but not the least... BE PATIENT.. You bought a stock, it's prices are not moving? Hold on. A price can never stay the same forever. If there's nothing interesting to buy. Just wait. Don't just go tie yourself in some good-for-nothing shares. Always be patient.
Published in Investing Strategy
