Sunday, January 4, 2009

Do It Yourself Stock Picking Rules

Well, these are some rules that I read from Burton Malkiel's Random Walk Down Wall Street. Basically, he advises investing your funds in an index fund. If however the gambler streak in you refuses to play this seemingly dull strategy, another alternative is to invest a portion of your funds yourself. Here are the rules for the DIY strategy:

Rule 1: Confine stock purchases to companies that appear able to sustain above-average earnings growth for at least five years.

Rule 2: Never pay more for a stock than can reasonably be justified by a firm foundation of value.

Rule 3: It helps to buy stocks with stories of anticipatory growth on which investors can build "castles in the air".

Rule 4: Trade as little.

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