23 October 2011

6 Investment Rules by World's Top Investors

Do you have hiccups when it comes to investing? Are you skeptical about what are the right and wrong investment strategies? Of course if you're an amateur investor there are many questions that pops up with your half baked knowledge. But don't you think that you need to have a steadfast strategy that is built around a set of rules?

Here is a set of rules that has been listed out by some of the World's greatest investors. You will be surprised to know their strategies as some of them are as simple as one into one is one reports Forbes.

"To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade." - Dennis Gartman

Dennis Gartman
Dennis Gartman began the publishing of The Gatman Letter in 1987. The dailydose is a commentary of global capital markets. The Gartman Letter acts like a knowledge base for all hedge funds, brokerage firms, mutual funds and grain and trading firms around the world.

His above rule explains that it is very necessary for every young investor to understand the factors that are driving a trade. He says that a technical analysis has to be generated by the market activity. Technicalities can help to measure an intrinsic value and also helps you analyze its future value.

"It's Far Better to Buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price" - Warren Buffett

warren buffett
Warren Buffett is widely known as the world's wisest investor and the most successful investor in history. He is known as world's third richest man and has also been a financial advisor to many presidents and world leaders across the globe.

Many prestigious universities and colleges use the yearly letter that is written by Buffett to his investors in his company Berkshire Hathaway.

In the above quote, Buffett gives two advices to investors. When evaluating a company for a buy it is very important to firstly check on the quality of the company and then the price. You need to have strong confidence in the balance sheets and the management of the company. Only after you have the confidence in the quality of the company, the price needs to be evaluated. According to Buffett, if the company is not of good quality then don't buy the company because it has quoted a low price.

"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

Bill Gross
Bill Gross is the founder of pacific Investment Management (PIMCO). 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.

Gross suggests youngster's that diversification is a good thumb rule but it is also a risk at times when one of your profits is from only one of your picks and other picks don't do the same. 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.

"We're getting hurt, but I'm a long-term investor" - Prince Alwaleed Bin Talal

Prince Alwaleed Bin Talal
An investor from Saudi Arabia, he founded the Kingdom Holding Company. 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.

His suggestion for investors is , 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.

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

Carl Icahn
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. 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?

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.

"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" - Carlos Slim

Carlos Slim
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.

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.