Rules I Use to Invest Now and Strategies: A House Divided Comes Together
September 17, 2009
– Comments (4)
This post is the rules I invest by now (all learned the hard way of course). The next post will be my current positions, which I think you all will find a bit suprising considering my past. Anyway here it is. Rec the heck out of this and I hope it helps fellow Fools and others in attaining investing success without as much of the pain.
I call the strategy a House Divided Comes Together, because it is a hodgepodge of stuff smart people came up with (Lynch, Buffett, etc). None of this is my own of course. It's written more in note style, so much of it is just phrases.
(1)Value/GARP (buy stocks $.50 on the dollar and distinguish between good cheap and bad.
(2) No short selling and no margin allowed
(3) Do just a few things well (focused)-> my goal
(4) Behind every stock is a company, find out what it is doing.
(5) Don't swing a lot, but swing for the fences when you go for it.
(6) Owning a stock is like owning children. Don't have more than you can handle.
(7) If you can't find attractive companies at attractive prices, don't be afraid to sit on cash.
(8) Patience- investing is a marathon, not a sprint.
(9) Invest in what you know (can I explain the business model and thesis unaided?)
(10) Only try to control the controllable: Don't worry about the rest
(11) Question: What is the market doing today Answer: I don't care. (long term)
(12) #1 Don't lose money #2 Don't forget #1
(13) Whatever offer Mr. Market is making today, it is my choice whether to accept or reject it. After all, he is a manic depressive idiot.
(14) Play with house money only and manage downside risk. Ie. If stock doubles take half off the table. If afraid of it falling, but like it long term, employ costless collars (options).
(15) Never chase a stock (learned by losing so much money on that biotech stock)
(16) Margin of Safety Investing- never forget it!
(17) Wait for the right price and don't be afraid to sit on cash (I wanted First Solar at $160, but I waited for $120 to dive in)
(18) Invest at the point of maximum pessimism, when everyone else is jumping off the boat. However, make sure the boat isn't sinking (bank stocks in march, kroger recently when it missed earnings)
(19) Track each dollar and make sure not to overspend or overtrade. Commissions rack up fast.
(20) Under the radar, undiscovered stocks can be amazing if the fundamentals and story line up and reality supports the thesis. Be skeptical- guilty until proven innocent
(21) Be skeptical- always look for reasons not to invest in a stock and things that could take it down (don't overkill on this one, just need to develop a healthy dose of skepticism to keep me from getting burnt and make sure I'm not just seeing a glass half full)
(22) Don't rush- a good idea today will still be a good idea tomorrow. Take time to research.
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Again, these are all just my short hand notes I use and not prettied up. Please REC THE HECK OUT OF THIS, SO THAT EVERYONE CAN LEARN FROM MY MISTAKES. Especially the new people at CAPS, so they can enjoy investing without the steep learning curve I had to experience and without the pain.
Next post will be my current positions, which I think you will find pretty interesting all things considered, and then I will go to posting once a week or so just for updates.
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