Keeping Out Of Trouble: Your 2009 Intelligent Investor Resolutions
I have to confess, I love reading Sanjay Bakshi’s articles. He is a brilliant value investor and teacher. I link to many of his articles and highly recommend you visit his website at SanjayBakshi.net. Today, I’m recommending another article, this one is written as a set of principles that investors should follow to stay out of trouble. Click Here To Read About Essential Value Investing Principles & New Year Resolutions
Article Introduction (Via Sanjay Bakshi)
As the horrendous 2008 for the world’s equity investors came to an end, I was approached by your magazine’s editor to give you four resolutions for 2009 and beyond, which, if implemented by you, should keep you out of trouble.
Article Excerpts/Summary (Via Sanjay Bakshi)
Here is a list of simple new year resolutions that should keep you out of trouble.
1. You Will Avoid Equities When They Become Historically Expensive
Remember this: History tells us that when markets fall, almost every stock falls too. Sure there are cheap things to buy in a bull market. They are traps. You will avoid them because you know that cheap things will become cheaper after a major market decline.
2. You Will Never Speculate In IPOs
“You must keep in mind that IPOs are hugely promoted by people who are paid to promote IPOs — merchant bankers who are paid from the money they raise. Listening to a merchant banker’s pitch on an IPO being promoted by his firm is pretty much like asking the barber if you need a haircut.”
3. You Will Avoid Leverage At All Levels
Unless you are a highly experienced and successful investor, you will avoid leverage by not only never borrowing money to buy stocks but also by avoiding investing in highly indebted companies. Leverage can hurt you in both situations.
4. You Will Learn From Vicarious Experience
You have two types of experience — direct and vicarious. You also have an automatic tendency to over-weigh your own experiences and under-weigh other people’s experiences (as in “It can’t happen to me!”). In 2009 and beyond, you will resolve to change this by consciously trying to learn from the experiences of others. You will resolve to learn about mistakes — errors of judgement made by others. The best way to do that is to study about mass errors of judgement.
Click Here To Read About Essential Value Investing Principles & New Year Resolutions (as pdf)
