The 10 Rules of Investology
I want to copy a snippet from the book Trading the Plan by Robert Deel on the 10 rules of investology. I could not have summed it up better myself.
- No one wins 100% of the time. If you think you are going to win 100% of the time you are wrong. The best portfolio managers in the world have negative years and the part of being successful is not beating yourself up about it. Losing is just part of the cost of doing business.
- Invest with a plan. Set objectives before you ever buy an instrument. Define all the outcomes, not only what you will do if the plan goes right but also what you would do if it goes wrong. Write your plan down on paper and follow it.
- Always look at a chart. Never buy a share or instrument without looking at the price range of the instrument over the past year at least. Even if you know nothing about technical analysis, just look at a line graph over the past year and you will see that the price action does tell a story.
- Have some risk management plan. Use stop losses or other means of protecting capital. Don’t use mental stops.
- Buy and sell only on confidence. Many times you won’t feel quite right about a buy or sell decision. If this feeling persists after you have done all your research, then don’t take a position. Don’t try to find a good reason for making a bad decision.
- Buy only liquid investments and liquid markets. By following this rule you can be assured of reasonable good execution of your trade and the ability to sell when an emergency requires it.
- Don’t buy or sell on HOT tips. Make decisions based on facts.
- Buy undervalue and sell overvalue. Simply put: Buy low, sell high.
- Be patient and let time be your friend. Making money safely takes time. The only thing you get in a hurry is trouble. Remember every day is not a trading day.
- Learn from your mistakes. The most successful investment professionals learn from their mistakes. Many even go as far as writing them down and analysing the problem. Mistakes can be costly, so use them as learning experiences. Don’t make the same mistake twice.
See you soon
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