special report below, I identify 5 classic investing rules that every investor can use throughout their lifetimes
The first rule of investing is to protect your capital. Use stops.
Most professional traders, and I know most people are not professional enough to do this, will place their sell stops below what they consider to be critical support. This is a matter of interpretation and requires experience. I can almost guarantee your broker doesn’t know how to do this so you should adopt one of the mechanical methods.
When your stock or mutual fund is making that loud swishing noise going down the porcelain container your broker always comes up with the sage advice, “You are in for the long term” or “The market always comes back”. In your lifetime?
Take a look at some of the dogs you are carrying in your portfolio right now. Figure out what would have happened if you had put in a trailing stop. My experience of trading for more than 30years has shown that if you had been stopped out that within 60 days that stock will be trading lower than your sell price about 80% of the time.
The second rule of Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.”
The third rule of Buy value, and sell hysteria.
Paying less than the underlying asset’s value is a proven successful investing strategy.
Buying overvalued stocks has proven to under perform 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.
The fouth rule of Avoid popular stocks, fad industries and new ventures.
Buy an investment when it has few friends.
The fifth rule of 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.