“The trick of sound investment in 3 words; margin of safety” – Benjamin Graham GOOD SENSE Idea: If a small business is paying out all its income as dividends, no margin is had because of it of protection. When a continuing business downturn occurs, the dividend must be reduced. Invest in businesses that have higher income than dividends to help ensure dividends won’t be cut during business downturns. Financial Rule: Rank stocks and shares by their payout ratios. “All you need for a life of successful trading is a few big winners” – Peter Lynch Common Sense Idea: Invest in businesses that have a brief history of solid growth.
If a business has maintained a higher growth rate for several years, they will probably continue to achieve this. The more a business expands, the greater profitable your investment can be. Financial Rule: Rank stocks by long-term income growth. “Psychology is probably the most important factor in the marketplace – and one which is least understood” – David Dreman Common Sense Idea: Look for businesses that individuals invest in during recessions and times of panic. These businesses will have a comparatively steady stock price that will make them simpler to hold for the long run.
Financial Rule: Rank shares by their long-term volatility. 250,000 houses, the money is taken by you. It is the same with a stock. When you can sell a stock for much more than it will probably be worth, you should. Take the money and reinvest it … Read the rest