Recalling the Mutual fund disclaims Mutual Funds are subject to market risk. Please read the offer document carefully before investing”. Every direct investment in the market through financial instruments equities/commodities/derivatives is subject to market risk . Investors develop their own strategies with some success gaining in to profits and some failures lead to losses.
Recently Dan Bunting passed a man who managed money on behalf of private individuals and institutions for 40 years – He developed his own laws worth reading and sharing !!
- Sell stocks of companies that announce huge acquisitions, that overdiversify, or that spend a fortune on a lavish new headquarters.
- Avoid stocks where management picks fights with analysts (or, by extension, hedge funds). See Overstock.com in 2005; Netflix in 2010.
- Watch out when executives start selling a lot of stock — regardless of plausible-sounding excuses. Top execs in home-builders, mortgage underwriters and Wall Street dumped billions before the 2008 crash.
- “Run a mile” from all stocks in an industry going through a huge investment boom: Massive overcapacity and consequent collapse is inevitable.
- Steer clear of investing in manufacturing companies. Their industries are usually plagued with extreme cycles of boom and bust, overcapacity and slumps.
- Pay little attention to economists or market gurus.
- Mistrust all mathematical trading formulas as well — they invariably fail just when you most need them to work.
- Look for companies where the insiders are buying lots of stock.
- Look for companies generating a lot of cash — a great sign of sustained out-performance.
- Look for companies which have monopolies (or near monopolies), and those which manage to take out their main competitors.
- Remember you are buying businesses, not just stocks. Pay close attention to the quality of the business, and especially the quality of the management.
- Look for companies which have earned the trust of consumers, and which have very strong brand names.