Tips from the Old dogs in the Park!
All are beginners at some point. And even if you are not, the time you stop feed yourself with new knowledge or latest common sense, you are in danger. One of our favourite sources to frequently go to for a meal of news and insights is The Motley Fool.
They published some valuable tips from seasoned professional investors. The full list is 15 tips, so do go on to the site if you like the first Five that we have listed below.
Value investing is a proven strategy for generating enormous wealth in the stock market. To help get you up to speed on this investing strategy, here is a collection of valuable tips from some of the greatest value investors of all time.
1. “All intelligent investing is value investing — acquiring more than you are paying for. You must value the business in order to value the stock.” — Charlie Munger
Stocks are not just pieces of paper or blips on a computer screen, they represent part-ownership of a business and a legal claim on its cash flows. That’s why a value investor strives to calculate the intrinsic — or true — value of a business. Only then can you value its stock and identify genuine bargains.
2. “Rule No. 1: Never lose money; Rule No. 2: Never forget Rule No. 1.” — Warren Buffett
Value investing is inherently defensive. A value investor constantly tries to purchase assets for less than they are worth. By doing so, you are protecting your downside and reducing the probability of a permanent loss of capital.
3. “Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Ben Graham
Wise investors give themselves room for error. A margin of safety — or the difference between your estimate of the intrinsic value of a stock and its market price — provides an added layer of protection when investing. The larger the margin of safety, the lower the risk, and, ultimately, the higher the potential gain.
4. “The most common cause of low prices is pessimism – sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces.” –Warren Buffett
It’s often during times of distress that stocks trade at prices that value investors would consider to be supplying an adequate margin of safety. Rather than to be feared, these turbulent periods should be appreciated for the valuable gift they provide: opportunity.
5. “Cash combined with courage in a time of crisis is priceless.” — Warren Buffett
To prepare for these opportunities, investors should maintain some dry powder in the form of cash reserves. In addition, you must develop the confidence to act in times of great uncertainty, while still maintaining the humility to realize that you are working with imperfect information.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.read more at fool.com
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