16 Rules for investment success
If all 16 fact-based rules are carefully followed (not just the ones you like), your investment results can materially improve:
1. Consider buying stocks with each of the last three year's earnings up 25%+, return on equity of 17%+ and recent earnings and sales accelerating.
2. Recent quarterly earnings and sales should be up 25% or more.
3. Avoid cheap stocks. Buy stocks selling for $15 to $100 or more.
4. Learn how to use charts to see sound bases and exact buy points. Confine buys to these points as stocks break out on big volume increases.
5. Cut every loss when it’s 8% below your cost. Make no exceptions so you’ll avoid any possible huge, damaging losses. Never average down in price.
6. Follow selling rules on when to sell and take profit on the way up.
7. Buy when market indexes are in an uptrend. Reduce investments and raise cash when general market indexes show five days of increased volume distribution.
8. Pick companies with management ownership of stock.
9. Select stocks with increasing institutional sponsorship in recent quarters.
10. Current quarterly after-tax profit margins should be improving, near their peak and among the bet in the stock’s industry.
11. Don’t buy because of dividends or P-E ratios. Read a story on the company. Buy the No.1 company in an industry in earnings and sales growth.
12. Pick companies with a superior new product or service.
13. Check into companies buying back 5% to 10% of their stock and those with new management (What is management’s background)
14. Don’t try to bottom guess or buy on the way down. Never argue with the market. Forget your pride and ego.
15. Find out if the market currently favors big-cap or small-cap stocks.
16. Do a post-analysis of all your buys and sells. Post on charts where you bought and sold. Evaluate and develop rules to correct your major mistakes. It’s what you learn after you think you know what you’re doing that’s vital. That’s how to improve your results.