You will truly profit from investing only when you have a clear appreciation of its principles and realities.
Once you understand these, you will be better able to keep a cool mind during the inevitable ups and downs -- and reap riches by investing with controlled risks.
- Investment rewards can only be increased by the assumption of greater risk
- Your actual risk in stock and bond investing depends on the length of time you hold your investment
- Decide how much risk you are willing to take to get high returns
- Dollar-cost averaging can reduce the risk of investing in stocks and bonds
- Stock prices are anchored to 'fundamentals' but the anchor is easily pulled up and then dropped in another place
- If you buy stocks directly, confine your purchases to companies that appear able to sustain above-average earnings growth for at least five years and which can be bought at reasonable price-earnings multiples
- Never pay more for a stock than can reasonably be justified by a firm foundation of value
- Buy stocks with the kinds of stories of anticipated growth on which investors can build castle in the air
- Trade as little as possible
- Give serious thought to index funds
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