Recipes for an individual investor
Fortunately, today the realities are such that many of us are drawn to home baking. If you need a rich income, knead the dough with your soul and your hands. Get to the market and choose stocks for investment.
For starters, I’ll give you a general recipe based on the best ingredients from Peter Lynch. I hope you will like it and, perhaps, in the future, will push you to become the chef of your financial kitchen.
1. Each of us has enough intelligence to make money on the stock market. But not everyone has enough exposure. If you are prone to panic selling, you’d better bypass both stocks and mutual funds (we have mutual funds – mutual funds).
2. The stock market is not a gamble, provided that you choose good companies that you think will work effectively, and not just come from the price of shares.
3. Beware of companies with a growth rate of 50-100% per year. Investing in risky companies almost never pays off. Look for small companies that have achieved profitability and proven ability to reproduce their formula for success.
4. Make a clear idea of what you are investing in and why, and state the reasons why the shares of a company are worth holding. Considerations like “This action will grow, how to drink to give!” Do not pass here. Shooting at random, you almost always miss.
5. Never invest in a company if you do not know its financial condition. It is firms with a bad financial situation that lead to record losses. If you cannot find companies that seem attractive to you, put the money in the bank until you find one.
6. Never fall in love with the action. Always think objectively and not biased.
7. Avoid popular companies from popular industries. It is better to miss the first wave of interest in the shares (meaning IPO – initial public offering on the market) and make sure that the company’s plans are working.
8. Invest in several stocks, because out of every five stocks you choose, one will be excellent, one will be very bad and three will be good.
9. Shares, like children, should not have more than you can handle. If investments are not your main job, you will probably have enough time to keep track of 8-12 companies, buying and selling when there is a reason for it.
10. Do not speculate on stocks. Take your savings, put them in good stocks and hold them until they grow in value, and then sell them. And if they do not grow, then do not buy.
11. Do not sell shares until the company’s fundamentals deteriorate (dividend yield, earnings per share, earnings per share to its market price, net asset value per share, risk indicators). Otherwise, your only hope is Paul Getty’s financial success formula: “Get up early, work hard, get rich.”
12. The “bearish” argument always sounds smarter (meaning the likelihood of a market decline, a fall in the share price). You can find compelling reasons for selling stocks in every morning newspaper or in every issue of the evening news. ”
If suddenly you feel that an investor has woken up in you, and you are uncontrollably drawn to the stock market, then in these books by Peter Lynch you will find everything you need to search for profitable stocks for investment:
1) “Peter Lynch Method. Strategy and tactics of an individual investor “
2) “Replay Wall Street“