TMCnet Feature
August 28, 2020

6 Investment rules from Top Investors



The Investment market is a tricky one but like everything it also has a crack. Whether you are a small or a big fish in the pond, there are certain rules and tricks which applies to almost everyone. This we can say with assured certainty as these are tried and tested rules by some of the world’s top investors who have changed the shape and course of worldwide trading.



So, while they might not agree on everything, one thing is for sure that there is a well-defined strategy that could be taken as the route to success. Nobody can just jump on it, trying random approaches with expectations to become successful.  It is not important that you follow a specific strategy by a single investor. But it is of utmost importance that you design a set of some well-crafted investment rules and try to stick to them during your trading.

So, to help you with that, we have here accumulated some highly acclaimed investment rules by the six most successful investors in history:

A significant rule by Warren Buffet

“It’s far better to buy a wonderful company at a fair price than buy a fair company at a wonderful price”

He is perhaps the world's biggest hit when it comes to share market investing and these golden words of his still hold significance.

Here, is signifying the importance of identifying high performing companies and buying their shares and knowing when the right time to sell them back to the market is. The key here is to hold on to those shares for a longer time.

As if you can identify a company which is performing well and making high profits, it is very likely that it will continue to do so in the future too. If you're looking to buy and hold shares, read this handy guide from buyshares.co.nz.  This type of investment strategy is widely used, and many believe it is better to hold the goose and hatch its golden eggs later.

Some golden words by Bill Gross

The co-founder of one of the largest bond funds, PIMCO has some enlightening words to share about portfolio management.

He believes if "Do you really like a particular stock? Put 10% or so of your portfolio on it. Make the idea count. Good [investment] ideas should not be diversified away into meaningless oblivion."

Diversification is the key in investing and this fact is hidden from no one. Going by it, the idea is to not invest all your money into one single account. It is far more a very reliable approach. However, it has a certain drawback when it comes to making huge profits. This could happen if you have a very strong gut feeling about a share and you choose not to invest in the same, you might regret later when it finally accrues huge profits.

Basically, trading is a good balance of a part of smart thinking and research and a part of intuition and gut. So, if you feel very strongly about one stock then go ahead and invest a little over your estimate on that and thank yourself later.

Some wisdom shared by Dennis Gartman

The renowned author of the well-known publication, the German later had this amazing wisdom to share with us.

Dennis Gartman believed, "Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are 'right' only 30% of the time, as long as our losses are small, and our profits are large."

The whole crux of this statement is to be okay with a little losing if it is not too damaging. What new investors do is sell the share at the slightest sight of the profit and then they lose the amazing revenue they could be making otherwise if they hold on to it a bit longer. The reason they do it is because they are too scared to lose. This means that do not expect to take profit every time you trade, because this way the profit amount will remain to be small. Rather if you let a winning trade run you could be taking a huge chunk of profit every now and then.

Another apt observation by Philip Fisher

Popularly known as the father of growth investments, he stuck to one philosophy which says, “Invest for the long term”.

He had a futuristic approach since the beginning and he always believed in the potency and potential of start-ups and small companies. His philosophy is based on the approach of finding the hidden potential of small and large companies by not just judging them on the face value but by digging deeper into the background, once you find a good deal stick to it and reap the profits later.

Brilliant (News - Alert) words of knowledge by Carlos Slim

One of the richest hot shots in the trading industry, Carlos Slim has his mark on hundreds of companies which are progressing incredibly.

What he says is quite significant, "I am convinced that all this poverty in Mexico and in Latin America like it's happening in China is the opportunity to grow. It's an opportunity for investment." —Carlos Slim

Its idea of trading does not involve reading and studying a company based on its individual performance. The approach should be different, and one should have a wider perspective and look at the entire industry and the economy the company is operating in and its immediate relationship to that.

Look at the way it is dealing with the competitors and you will know a great deal about the company. So, do not think short-term and have a forward-looking approach to prepare for your big move.

A remarkable statement by Benjamin Graham

Popularly known as the father of Value investing and security analysis Benjamin Graham is the man who is an inspiration for Warren Buffet too.

“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game” by Benjamin Graham

He had a very realistic and pragmatic approach to deal with this whole trading situation. He believes investment is about buying low and selling high which obviously we know but has to be more deeply imbibed in our daily strategies.

Keep an open eye and find companies winners in the chaotic scenarios. His idea of a good company would have the following qualities:

  • Making profits above the average
  • Has a sustainable cash flow
  • The debt amount is considerably low
  • Value of assets is high
  • Performing better than competitors

Find these traits and you know you have caught a big fish and you are Golden!

Now that you have these Golden rules right in front of you, it is time to act on that and come up with an effective strategy of your own which could do wonders.



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