The 10 Commandments to better wealth

The 10 Commandments to better wealth

18 September 2017 - posted in Pre-Retirees and Retirees by Brenton Miegel

I read an excellent article from Marcus Padley (Marcus Today) recently and thought I would share a paraphrased version of it. It offered 10 Commandments of equity investing for new investors:

1) Focus on a few stocks:  There’s no point in trying to be a fund manager and understand 20+ stocks in your portfolio. Find 1 to 5 stocks and get to know them ‘intimately’ – that way you’ll get better returns in the long run;

2) Do the Hard Work: if you spend 1 hour researching a stock you’ll end up in the top 1% of people who know anything about it. Spend 10 hours and you’re in the top 0.00001%.  Take the time, do the research and ultimately be rewarded;

3) Be Contrarian: Being part of the ‘herd’ is no way to make significant gains with your portfolio. Researching and spotting the turn is where you can make money in what the market doesn’t expect, not what it knows;

4) Develop a Technical Discipline: Technical analysis on its own will not make you rich, but it will offer a significant risk management system. A share price is not only a line on a chart, but a line that represents thousands of people saying “you’re right” or “you’re wrong” – and it can be a useful piece of information.  When they start saying you’re wrong, don’t be smart;

5) Network: Having many sets of ears can be much better than just the two you have yourself.  Expand your group of investing friends.  Getting one or two ideas a year can be well worthwhile, especially if there’s a glass or two of wine involved with the conversation;

6) Use everything: Use fundamental research and technical trading skills.  It’s all contributing to the information you are gathering. Too may investors and traders are blinkered.  Pride?  There’s no place for that;

7) Don’t make mistakes: You cannot transform a portfolio with good stocks if the bad ones are constantly generating losses.  Controlling losses is easy – it’s right there in front of you on the spreadsheet, and so sorting them out first is important;

8) It’s about Stock Prices, not Businesses: Arrogant investors think their money is invested in a business that has the ‘herd’ controlling the price.  Share prices are 50% psychology and 50% value – not 100% of one or the other;

9) No Ego: No one, not even Warren Buffett, is SO GOOD at investing that they cannot learn something new.  Your investing methods will change over time, and so be flexible, respectful and open-minded;

10) Enjoy It: No one does anything well when they HAVE to do it!


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