“The way to learn to do things is to do things. The way to learn a trade is to work at it. Success teaches how to succeed. Begin with the determination to succeed, and the work is half done already.” -Benjamin Franklin
«  
  »

Investment Rules

One characteristic of every successful investor is that they all adhere to a set of investment rules. It is one thing to have rules, but it is not an easy thing to follow them and these rules will likely be more guidlines than hard and fast rules. Following are my rules that I intend to follow. Anytime I buy a stock I will have a checklist for each of these rules. These rules will also likely be added to or modified as I continue to learn from my mistakes and successes.

Buy Rules

Buying a stock is easy, maybe too easy. Anyone can hear a tip, or read about a company and go to a broker and purchase some shares. But I believe in being selective, and doing research before diving in. These Buy Rules should keep me from buying on a whim, which I’m sure leads alot of investors to bad results.

  1. Most recent Current Quarterly Earnings must be up at least 25% from the previous years same quarter.
  2. Annual earnings must be up at least 25% for each of the last 3 years.
  3. Look for new products or services, new management, or new conditions. Also new price highs.
  4. Look for stock coming out of a base on higher than normal volume
  5. Look for leading company’s in their industry.
  6. Look for institutional sponsorship.
  7. Be sure the overall Market is in an uptrend.

Sell Rules

As I said before, BUYING a stock is easy. The hard part is selling! Amatuer investors will often buy a stock, and hold on to it as it tanks thinking that it will bounce back, but it never does. If a stock does go up, then many investors will hold on too long thinking they will miss out on even more profits if they sell too soon, but then the stock reverses and any gains are quickly lost. Hopefully these sell rules will keep me from holding on to losers, and allow me to take good profits.

  1. Take a profit when the stock increases 20% from my buy point (unless the stock increases more than 20% in less than 3 weeks).
  2. Cut losses short at no more than 8% below my buy point.
  3. If there are 3 consecutive general market up days, and the stock has fallen or failed to keep pace with the market each of those days.
Category: Beginner Investment, Ideas, Investing

136 comments to Investment Rules

1 2 3