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12 Rules of Investing

Posted By Barry Ritholtz On May 1, 2005 @ 11:21 am In Investing,Rules | Comments Disabled

12 Timeless Rules of Investing

1. An attempt at making a quick buck often leads to losing much of that buck.

• The people who suffer the worst losses are those who over-reach.
• If the investment sounds too good to be true, it is.
• The best hot tip I’ve found is “there is no such thing as a hot tip.”

2. Don’t let a small loss become large.

• Don’t keep losing money just to “prove you are right.”
• Never throw good money after bad (don’t buy more of a loser).
• When all you’re left with is hope, get out.

3. Cut your losers; let your winners ride.

• Avoid limited-upside, unlimited-downside investments.
• Don’t fall in love with your investment; it won’t fall in love with you.

4. A rising tide raises all ships, and vice versa. So assess the tide, not the ships.

• Fighting the prevailing “trend” is generally a recipe for disaster.
• Stocks will fall more than you think and rise higher than you can imagine.
• In the short run, values don’t matter.

5. When a stock hits a new high, it’s not time to sell . . . something is going right.

• When a stock hits a new low, it’s not time to buy . . . something is going wrong.

6. Buy and hold doesn’t ALWAYS work.

• If stocks don’t seem cheap, stand aside.

7. Bear markets begin in good times. Bull markets begin in bad times.

8. If you don’t understand the investment, don’t buy it.

• Don’t be wooed. Either make an effort to understand it or say “no thanks.”
• You can’t know everything, so don’t stray far from what you know.

9. Buy value, and sell hysteria.

• Paying less than the underlying asset’s value is a proven successful strategy.
• Buying overvalued stocks has proven to underperform the market.
• Neglected sectors often offer good values.
• The “popular” sectors are often overvalued.

10. Investing in what’s popular never ends up making you any money.

• Avoid popular stocks, fad industries and new ventures.
• Buy an investment when it has few friends.

11. When it’s time to act, don’t hesitate.

• Once you’re in, be patient and don’t be rattled by fluctuations.
• Stick with your plan . . . but when you make a mistake, don’t hesitate.
• Learn more from your bad moves than your good ones.

12. Expert investors care about risk; novice investors shop for returns.

• If you focus on the risks, the returns will eventually come for you.
• If you focus on the returns, the risks will eventually come for you.



Source
:
12 Timeless Rules of Investing
By Dr. Steve Sjuggerud, President, Investment U
http://www.investmentu.com/bin/u/x/InvestmentU_12TimelessRules.pdf


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