Methodology to Weight the Value
·
Have a methodology to weight the value of your
holdings.
a. The
best investors look at a company’s share price relative to revenue, free cash
flow, earning momentum, and the rate at which shareholder equity is
compounding.
b. Stick
to your methodology & have an exit strategy.
c. As
an investor, you need to find your own best call in terms of the market. Don’t
concern yourself with every ball that comes across the plate.
·
Great investors don’t pull the trigger on a
purchase or sale based on a spur-of-the-moment impulse (Remember: The crowd is
often wrong).
·
Be properly diversified, not overly diversified.
I don’t want a lot of good investments. I want a few outstanding ones.
·
Live with
volatility without changing your investment strategy.
·
Recognize that volatility is not the same as
risk.
·
Study history:
d. By
watching the reactions of the market to external stimuli, over time you will
hone your ability to judge the most opportune times to enter or exit the stock
market.
e. It
is found that the crowd is always wrong at market turning points but often
right once a trend sets in – unless volatility is extremely low or high, one
should think twice before betting against the crowd.
f. History
shows that the longer you hold on to a broadly diversified portfolio – the higher
the odds you will experience a significant market downturn. Few of us can wait
20 or 25 years for our investments to recover from a major crash.
g. Today’s
darling is usually tomorrow’s dog.
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