About Me
I like to think of myself as an amateur portfolio manager. As the bible says I am not despising my days of little beginnings. I will getto the top.
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- A specific need must be funded with specific assets dedicated for that need: If you are saving for a car which you expect to buy in a years time then, then invest in one year bonds and treasury certificates.
- Develop appropriate sources of investment information: Subscribe to financial magazines like businessday, financial standard, stockwatch and moneywise.
- Choose a broker with a large and well respected research department: The broker should be one that does a large amount of institutional business so that you will have access to the ideas that are making the rounds in the investment community.
- Confine stock purchases to companies that appear able to sustain above average earnings growth for at least five years: Consistent growth not only increases the earnings and the dividends of the company but may also increase the multiple that the market is willing to pay for those earnings
- Never pay more for a stock than its firm foundation value: Though it is difficult to gauge the exact value of a stock, it can be estimated by comparing the multiple the stock is selling at with the market. Buy stocks whose multiple are low relative to their growth potential. If the growth takes place you will get double benefit as earnings and the multiple increase. Conversely beware of stocks with very high multiples and many years of growth already discounted in its price. If earnings decline rather than increase you will get double trouble as the earnings and the multiple will fall resulting in heavy losses for you.
- It helps to buy stocks with the kind of stories of anticipated growth on which investors can build castles in the air: Investors are emotional beings driven by hope, gambling instinct, fear and greed in their stock market decisions. The key to successful investing is being where the other investors will be several months before they get there.
- Trade as little as possible: Frequent trading reduces your overall return as you have to pay transaction costs to get in and out.
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