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25 Pearls for the Individual Investor
by David Van Knapp, author of
SENSIBLE STOCK INVESTING:
How to Pick, Value, and Manage Stocks
and
THE TOP 40 DIVIDEND STOCKS FOR 2010:
How to Generate Wealth or Income from Dividend Stocks
August, 2006
Here are 25 Sensible Stock Investing “rules” for individual 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 stocks 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. Stock 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 stock investing goals and construct strategies to reach them.
25. Don’t be afraid to have some of your “stock money” in cash.
by David Van Knapp, author of
SENSIBLE STOCK INVESTING:
How to Pick, Value, and Manage Stocks
and
THE TOP 40 DIVIDEND STOCKS FOR 2010:
How to Generate Wealth or Income from Dividend Stocks
August, 2006
Here are 25 Sensible Stock Investing “rules” for individual 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 stocks 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. Stock 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 stock investing goals and construct strategies to reach them.
25. Don’t be afraid to have some of your “stock money” in cash.
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