MindMap-12 Rules of Investing

MindMap-12 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 overreach.
  • 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 that is going right.
  • When a stock hits a new low, it’s not time to buy something that 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.
  • Bull market – a financial market of a group of securities in which prices are rising or are expected to rise. Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue.

    Bear market – a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.

• 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 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.
  • 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.
• Courtesy: Steve Sjuggerud, InvestmentU.com