6 Rules From 6 Of The World’s Top Investors

Investors don’t agree on much, but they do agree that making money in the market comes with a steadfast strategy that is built around a set of rules. Think for a moment about your early days as an investor. If you’re like many, you jumped in with very little knowledge of the markets. When you bought, you didn’t even know what a spread was and you sold either too early if you saw a gain or too late if your stock dropped in value. If your only investing rule has been to not follow any rules, you’re probably disappointed with your results so far.

If you don’t have your own carefully crafted suite of investing rules, now is the time to do it and the best place to start is to ask the people who have had success in their investing careers. We not only found people who can claim success, we found six of the most successful investors in history. (So you’ve finally decided to start investing. But what should you put in your portfolio? Find out here. See How To Pick A Stock . )

1. Dennis Gartman — 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.

Dennis Gartman began publishing The Gartman Letter in 1987. It is a daily commentary of global capital markets that is delivered to hedge funds, brokerage firms, mutual funds, and grain and trading firms around the world each morning. Mr. Gartman is also an accomplished trader and a frequent guest on financial networks.

His rule above addresses a wealth of mistakes that young investors make. First, let winning trades run. Don’t sell at the first sign of profits. Second, don’t let a losing trade get away. Investors who make money in the markets are OK with losing a little bit of money on a trade but they’re not OK with losing a lot of money.

As Mr. Gartman points out, you don’t have to be right a majority of the time. What is more important is to let a winning trade run and get out of a losing trade quickly. The money you make on the winning trades will far outpace the losing trades.

2. Warren Buffett — It’s Far Better to Buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price

Warren Buffett is widely considered the most successful investor in history. Not only is he one of the richest men in the world but also has had the financial ear of numerous presidents and world leaders around the world. When Mr. Buffett talks, world markets move based on his words.

Mr. Buffett is also known as being a prolific teacher. His yearly letter to investors in his company, Berkshire Hathaway, is used in college finance classes in the largest and most prestigious universities.

Mr. Buffett gives two key pieces of advice to the investor: When evaluating a company, look at the quality of the company and the price. The quality of the company is most important and requires that you understand balance sheets, listen to conference calls and have confidence in the management. Only after you have confidence in the quality of the company should the price be evaluated. According to Mr. Buffett, if the quality of the company is high, don’t expect to buy it at bargain bin prices. If the company isn’t a quality company, don’t buy it because the price is low. Bargain bin companies often produce bargain bin results. Sometimes good companies have bad stock and when you see that, dig deeper into your research. If the company still looks good, buy it. (To learn more, refer to What is Warren Buffett’s Investing Style . )

3. Bill Gross — 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.

Bill Gross is the co-chief investing officer of PIMCO and manages the PIMCO Total Return Fund, one of the largest bond funds in the world.

Mr. Gross’ rule speaks about portfolio management. A universal rule that most young investors know is diversification or not putting all of your investing capital into one name. Diversification is a good rule of thumb but it also diminishes your profits when one of your picks makes a big move while other names don’t. Making money in the market is also about taking chances based on exhaustive research. Always keep some cash in your account for those opportunities that need a little more capital and don’t be afraid to act when you believe that your research is pointing to a real winner.

4. Prince Alwaleed Bin Talal — We’re getting hurt, but I’m a long-term investor

You may have never heard of Prince Alwaleed Bin Talal, but he’s well known in the investing world. An investor from Saudi Arabia, he founded the Kingdom Holding Company. If anybody had reason to panic, it is him. Prior to the Great Recession, he owned a 14.9% stake in Citigroup at a price much higher than its post-recession price. In addition to that, his real estate investments in India lost considerable value after the 2009 recession.

When others may have sold, Prince Alwaleed Bin Talal has done what many of the best investors have done to amass their riches: Hold the stock for a long period of time, taking large market events out of the picture and collecting a dividend while they wait.

It’s OK to trade stocks on a short or medium term basis, but the bulk of your portfolio should be invested in longer term holdings.

5. Carl Icahn — You learn in this business If you want a friend, get a dog.

Carl Icahn is a private equity investor and modern day corporate raider. buying large stakes in companies and attempting to get voting rights to increase shareholder value. Some of his holdings have included Time Warner, Yahoo, Clorox and Blockbuster Video.

Mr. Icahn has made his fair share of enemies over the years, but investors shouldn’t take his advice strictly in terms of interpersonal relationships. How many times in your investing past have you read an article, watched a news report or took a tip from a trusted friend about the next hot stock and lost money? (Hopefully you never acted on an unsolicited e-mail sent to you about a big-moving penny stock.)

There is only one piece of advice to act upon: Your own exhaustive research based on facts (not opinions) obtained from trusted sources. Other advice can be considered and verified but it shouldn’t be a sole reason to commit money.

6. Carlos Sim — 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

Another of the richest men in the world, Carlos Slim. owns hundreds of companies and has an employee base of more than 250,000. His quote above represents a mindset that the best investors possess. They don’t look at what’s happening now. By studying the momentum of a company or an entire economy and how it interacts with its competitors, great investors invest now for what will happen later. They are always forward thinking. If you’re looking at now or trying to jump on the bandwagon of an investment that has already had short term gains, you’ve probably missed the big move. Try to find the next big winner but always anchor your portfolio with great companies that have a long track record of steady growth.

The Bottom Line is Profits

Now that you’ve read about one of each of these investors’ rules, it’s time to become a student of these investors and learn from their experiences. Each of these investors is known for being students of the markets, as well as leaders. As you begin to apply your new rules and commit to following them even when your mind tells you no, you’ll see the profits start rolling in. Maybe you will make this list of legendary investors someday. (These five qualitative measures allow investors to draw conclusions about a corporation that are not apparent on the balance sheet. Check out Using Porter’s 5 Forces To Analyze Stocks .)

Stock investing is boring.

That’s right! Stock Investing is supposed to be boring. You see, our society has conditioned us to seek excitement in everything we do. Successful investing should be boring, which may explain why so many excitement-seeking investors suffer disappointing returns.If you want excitement, go to Genting in Malaysia or Vegas in USA.

If you were about to begin your investing career, you might want to have a list of the most important things you could do to be successful. We have distilled many years of experience into the secret practices that successful investors most often follow. Many of them are positive steps you can take to achieve the greatest success. Others involve avoiding costly mistakes. And this is no small part of the equation. The last thing any investor wants to do is to spend long periods of timeyears eventrying to make up for devastating losses.

There are some successful investors who have followed a different path. Some have taken big risks, for instance, that have paid off. But these are a small minority of the many people who invest their money. If youre like many investors, recent market volatility has made you more sensitive to risk. In fact, in light of all the bad news being reported in the mainstream media you may be tempted to throw up your hands and sell all your stocks. However, if you do youre likely to miss out on strong gains in the coming months and years.

Youve no doubt been affected by the extraordinary changes of the past years. Youve seen big daily swings in the KLCI. Some small cap stocks briefly collapsed, then revived with scary vigour. Some of the longest-standing investment banks in the USA went under. More recently, unrest in Libya and other Middle Eastern countries has sent oil prices higher and the crisis in Japan has created further uncertainty. But no matter what happens in the global economy, I know that select stocks will continue to profit far more than others. These high lying stocks include banking. consumer and utilities are evergreen strong companies. These companies have the greatest potential for big gains in volatile markets.

The proof? In this most unpredictable time, The Successful Investor . have watched their Conservative Growth Portfolios increase a stunning 300% since 1997/98 Asia Financial Crisis. They achieved these results even as the recent market crash was decimating the portfolios of many investors. They did it by taking profitable advantage of the proprietary Value Investing System. And I see no reason why we cant repeat that performance, and perhaps even beat it, over the next 24 months!

Whats the secret to this kind of success?

SimpleIve learned in more than few decades of investing that above all else, investing with a conservative, reduced-risk strategy consistently and reliably beats other approaches. Ive seen this approach succeed time and time again. It works especially well in unpredictable markets like yesterday KLCI plunged 22.4 points on Wednesday 31 July 2013 when unfavorable downgrading news and rebounded strongly again on Thursday, 1 Aug 2013. It is this technique that has allowed CIO and fund managers to identify one winning stock after another. And to help you build wealth with lower risk in your private managed accounts for retirement planning.

The Successful Investor offers a proven approach to safe investing!

Yes, there is a steady way to make reliable profits in times like theseby investing wisely and early in stocks that grow relentlessly, building your wealth with less risk. Its this Private Managed Shares Investment (PMA) approach has allowed many valued investors to

Make profits in our Conservative Growth Portfolio Make profits in our Portfolio for Income-Seeking Investors And make profits in our Aggressive Growth Portfolio

And thats in spite of the recession and Market Crash of 2008/2009. And it is important to note that these are all published portfolios that you will be able to follow yourself. It does not matter what happen to the stock market a time that included the real-estate meltdown, the credit crisis, and, of course, the stock-market crash of 2008/2009, if you think the good listed companies are financial strong and well managed, then hold on to their stocks forever.

Here are just some of the stocks that have earned big profits like Digi, Nestle, Maxis, PPB, PBB, LongPac, Dutch Lady, IOI, TNB, Tan Chong etc. Combine outsized profits with minimal losses, and youve got a portfolio that makes you a great deal of money AND lets you sleep soundly at night in both good markets and bad.

7 Secrets for stock market success

The foundation behind CIO and fund managers stock selection success is their exclusive Value Investing System. Its designed to find stocks whose built-in value limits losses during downturns. Of course, these same factors that prevent a stock from plummeting during market turbulence can also send prices soaring. And with the geopolitical and economic conditions were looking at during the next several years, youll want the profit-making accuracy of using Value Investing System more than ever before.

That way youll know precisely what to do if

New political and economic policies impact trade, taxes and international market stability especially the global stock markets. The roller-coaster ride with the price of oil continuesor political turmoil in the Middle East leads to tighter supplies.

I think youll understand why the 7 secrets revealed here are the key to constructing a portfolio that delivers consistent returns regardless of what the rest of the market is doing.

The first secret is to know how to recognize value.

Investment quality is the key to higher profits in volatile markets. The 2008/2009 stock-market downturn brought a record-breaking sell-off of historical proportions. But this was not my first time helping investors navigate downturns. During more than 40 years in the investment business (starting with a part-time job in high school), I have seen 5 major market downturns. And with that experience has come some wisdom.

One of the things Ive learned is that the market doesnt stay down. And thats certainly been the case with the most recent downturn: The KLCI Stock Exchange has shot up dramatically since its 2007/2008 low and has lots of potential to move even higher. Moreover, in every downturn, good stocks get dumped with the bad. But only good stocks have the built-in value to rebound. That makes these companies the key to earning the biggest returns as the economy continues to improve. Now is the time to carefully get rid of junk and recognize bargains that will make significant gains. So, if you can recognize good stocks and know when to buy, they offer a once-in-a-lifetime opportunity that could increase your profits 100% or more in just 2 to 3 years from now. You can prepare yourself to profit by first getting rid of your losers.

Build your portfolio with our time-tested 5-sector approachA portfolio is more than just a collection of individual investments. Its a combination of investments that work together over time to achieve your financial goals.

This is critical for making money in good times and protecting your wealth in a decline. The key, of course, is finding the right combination of investments. Stocks can be classified according to the many categories supplied by the stock exchanges, fund companies and bond rating companies. Categories like small caps, cyclicals, consumer non-durables and so on, ad infinitum. The problem with labels like these is that theyre designed for ease of classification, or to sell you something. I use a reality-based approach, which aims to cut your losses in a downturn and build your wealth when markets rise. Using this approach, I classify stocks into 1 of 5 easy-to-identify economic sectors:

Manufacturing and industry Resources and commodities Utilities Finance Consumer goods and services

As each sector has its own distinct characteristics. Finance and utilities are the most stable and offer some of the highest yields. The manufacturing and resources sectors expose you to above-average volatility, but offer strong growth prospects. Consumer stocks are somewhere in the middle.

Generally speaking, you should have holdings in all 5 economic sectors, with the proportion in each depending on how much risk youre willing to accept and how much current income you need. But above all, you need to stick to high-quality stocks while avoiding stock promotions. To ensure steady gains, my starting point is to immerse myself in financial statements. To increase your investing success, learn what the numbers really mean Like many investors, I start my search for winning stocks by looking at a companys income statement and balance sheet. But unlike the typical investor, I dont accept the figures that appear there, especially those that purport to show the companys earnings, and heres why

BEWARE: Earnings reports are almost NEVER a good indicator of how profitable (or unprofitable) a company really is. A companys earnings are inherently unreliable for a couple of reasons. First, theyre usually based on estimates of unit sales, costs and a variety of other factors, all of which are subject to constant revision. Second, earnings are adjusted (cynics would say manipulated) in accordance with a variety of accounting rules that frequently do more to distort than to clarify.

One way to overcome the distortions caused by deductions for goodwill, purchased R&D (research and development), depletion allowances, depreciation, etc. is to disregard them. You do that by adding these items back to earnings. This results in cash flow per share, which gives you an idea of how much cash a company has available for investment or dividends. Cash flow can reveal hidden value (which is what my Value Investing System is all about), but it can also hide problems Revealing value or hiding problems? As you saw with Public Bank Bhd’s shares, cash flow is often a better indicator of a companys fortunes than earnings. But thats not true for all companies in every sector. In some instances, cash flow can be terribly misleading.

The bottom line is that the calculations youll need to properly determine cash flow vary from industry to industry. Using the same formula for all companies in all economic sectors will likely fill your portfolio with losers. Youll find the tools you need to properly calculate a companys cash flow, including specific adjustments needed for particular industries. Once you have a companys earnings (whether you take the easy way and use reported earnings or calculate a more accurate cash flow figure), you can combine that number with the stocks price to get the P/E (Price/Earnings) ratio.

This is one of the most widely used investing tools on Earth. Unfortunately, it doesnt work the way most people think it does Is that stock a screaming bargain or a disaster in the making. The P/E ratio appears in the stock tables of just about every newspaper and is used by a great majority of investors. But although the P/E ratio seems easy to use, its much more complex than most investors realize

What number should you use for the E part of the ratio? Earnings for the preceding year, the current year or the next year? Is it more meaningful to compare a companys P/E ratio to that of other companies in its sector or to its own P/E ratio over various periods? How does the business cycle affect the P/E ratio of various kinds of companies, and what adjustments do you have to make to compensate for this phenomenon? Should you sell a stock if its P/E ratio gets too high? If so, how do you decide whats too high

Stocks with low P/E ratios are frequently among the most dangerous ones you can buy!

One of the biggest mistakes investors make is buying a stock with a low P/E ratio, thinking that this ensures that theyre getting a bargain. Sometimes thats true, but sometimes a low P/E stock is a sign of danger. Heres why When a profitable company is headed for a long period of losses, its share price usually drops far more quickly than its earnings. Thats because well-informed investors and insiders sell before the bad news becomes widely known.

So, before the E shrinks (i.e. before earnings disappear), the stock passes through a low P/E period. Buying at this point is like getting on a train just before it derails. Analyzing a companys income statement is the key to determining the quality of its earnings. Analyzing its balance sheet is the key to finding stocks about to soarExplosive profits from balance sheet treasures. One of my most consistently successful techniques for finding winning stocks involves going on a treasure hunt of sorts

Companies with hidden assets often see their share prices soar when the assets become public knowledge or the company uses them in innovative ways.Just as reported earnings dont really tell us how profitable a company is, its balance sheet doesnt always reveal the true value of its assets. Some of a corporations most valuable assetsits so-called intellectual propertyare carried on the books at nominal amounts.

This would include patents, customer lists, brand names, etc. The classic example, of course, is the secret formula for Digi or Coca-Cola, which is reputedly carried on the companys books at one dollar. In addition, many companies own assets that never appear on their balance sheets at all. These include such things as a crucial market position, or a long-standing customer base to which a company can sell new products and services.

The Successful Investor have made incredible profits over the years from companies that have hidden assets. As you can see, hidden value takes many forms. So it should come as no surprise that you cant uncover it using just one tool or technique.

What recent changes in the government if any mean to investors.Following US Obamas unfolding presidency will require a close read. He historically has a record of supporting policies that are bad for business and trade. But the Republican opposition will likely force him to moderate his approach. To read more about what I see ahead in the Obama administration, in USA is yet to settle. how about our PM Najb administration — huge external debts and downgraded rating plus RM weaker than SGD or USD? ETP and GTP can help curb inflation and build more cheap houses for poor people.

If youre tempted to forgo the research needed to find winning stocks and depend instead on advice from your stock broker, you better be aware of the brokerage industrys dirtiest little secretwhether you win or lose in stock punting than investing long term, the brokers always winners.

Stocks that are the most widely followed and highly touted by the major brokerage firms are not only more volatile than the overall market, they tend to nose dive as soon as theyre out of the spotlight.Beware of buzz. Before the crash, many stocks enjoyed an artificially inflated price thanks in part to all the hot air coming from analysts.

In part, this is a significant reason why we saw such a massive global market collapse in the past few years. Thanks to ferocious analyst projections, buzz or just plain reputation, some highly touted names in the financial markets crumbled. For example, a US solar-power silicon maker saw its stock drop nearly 95% in nine months as it failed to meet overly optimistic sales and profit projections in a competitive market. As well, the company faced a class-action lawsuit that accused it of making fake and misleading claims about its silicon-production process. And artificially inflated stocks are just one reason to be wary of brokers. With todays low interest rates some brokers are urging clients to buy structured investments

I like to call them Frankenstein investment products. They are created when a brokerage firms underwriting department takes genuinely desirable securities and slices and dices them into a new structured investment. While these investments often offer principal protection or a guaranteed interest rate, they also come with such big fees that while you may make a few RM dollars, the big winners will be your broker and his bosses in the banking world and financial markets.

P/s: It took me almost 14 days to finish reading a Stock Investing is Boring’s book, let our CIO Fund manager makes your money work harder for you is more challenging for us to work double hard and doing research to pick the winning stocks everyday when you are e enjoying life. It took me almost 2 hours to digest and write up the brief 7 secrets of stock investing success for you to read and know more.

If you like to share it with other friends and colleagues, please forward this article to them. If you want to help others learn to invest in stock market with peace of mind, then May I Help, just email their contact numbers and email addresses to alwinyau@retireriche.com anytime.