Advantages Of Individual Investor 

 

 

Some rules and facts that must be considered before invest single penny.

                                  

Don’t be panic when market goes down. If you invest in good company then don’t sell out until the fundamental not changed.

There is no need to be professional to invest in stock market. According to Peter Lynch says that the rule is: Stop listening to professional!  Twenty years in this business convince me that any normal person using the customary three percent of brain can pick stock just as well, if not better than the average Wall Street expert.

This is investing, as smart money isn’t so smart and the dumb money isn’t really as dumb it thinks. Dumb money is only dumb when it listen to the smart money.

 

The Power Of Common Knowledge


L’eggs is the perfect example of the power of common knowledge. It turned out to be one of two most successful consumer products of the seventies. In the early part of the decade, before I took over Fldelity Magellan, I was working as a securities analyst at the firm. I knew the textile business from having travelled the country visiting textile plants, calculating profit margins, PE ratio and the esoteric of warps and woofs. But none of this information was as valuable as Carolyn’s. I didn’t find L’eggs in my research; she found it by going to the grocery store. If a product becomes best seller without brand name recognition, imagine how it will sell once the brand is publicized. Carolyn didn’t need to be textile analyst to realize that L’eggs was a superior product.

How many women who bought panty hose, store clerks who saw the women buying panty hose and husbands who saw the women coming home with panty hose knew about the success of L’eggs? Millions


Two or three years after the product was introduced, you could have walked into any of thousands of supermarkets and realized that this was the best seller. From there, it was easy enough to find out that L’eggs was made by Hanes and that Hanes was listed on the New York Stock Exchange.

You know it before Wall Street knows it. Why wait for the Merrill Lynch restaurant expert to recommend Dunkin Donuts when you’ve already seen eight new franchises opening in your area? The Merrill Lynch restaurant analyst isn’t going to notice Dunkin Donuts until the stock has quintupled from $2 to $10 and you noticed it when the stock was at $2.

Investing in stock is an art, not science, and people who have been trained to rigidly qualify everything have a big disadvantage. If stock picking could be quantified, you could rent time on the nearest Cray computer and make a fortune. But it does not work that way. All the math you need in stock market you get in the fourth grade.

Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it doesn’t go up, don’t buy it.  Buying asset rich companies at fifty cent on dollar and then waiting for the marketplace to pay full amount. Warren Buffet, greatest investor of them all, looks for the same sort of opportunities I do, except that when he finds them, he buys the whole company.

If a stock is down but the fundamentals are positive, it’s best time to hold it even better to buy more.

Fund managers in general spend a quarter of their working hours explaining what they just did- fist to their immediate boss in their own trust department, and then to ultimate bosses, the clients like Flint at White Bread.

Some funds are further restricted with a market capitalization rule they don’t own a stock in any company below $100-million size.

You don’t have to invest like an institution. If you invest like an institution, you are doomed to perform like one, which in many cases isn’t very well. Nor do you have force yourself to think like an amateur if you already are one. If you are a surfer, a trucker, a high school dropout, or an eccentric retiree then you have got an edge already. That’s where the ten baggers come from, beyond the boundaries of accepted Wall Street cogitation.

When you invest, there is no Flint around to criticize your quarterly results or you semi-annual results, or to grill you as to why you brought Agency Rent-A-Car instead of IBM. Well, maybe there is a spouse and perhaps a stockbroker with whom you are forced to converse, but a stockbroker will be quit sympathetic to your odd choice and certainly isn’t going to fire you for picking Seven Oaks- as long as you are paying the commissions. And hasn’t the spouse (who does not understand the serious business of money) already proven a faith in your investment scheme by allowing you continue to make mistakes?

Maybe you should not have anything to do with the stock market, ever. That’s an issue worth discussing in some detail, because the stock market demands conviction as surely as it victimizes the unconvinced.

 

Congratulation you take one more step towards your financial freedom.

 This Summary from "Learn To Earn"

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