investing/trading...ive had a gut full., page-26

dixie I follow a couple of rules to protect my investments.
I lost close to $2 million in the last crash but am still ahead. Last time I didnt follow my own judgement and listened to all the die hard bulls.

How could I know more than Macquarie, BBI, the banks etc etc. A Macquarie broker advised me to invest in ABC learning, swearing its a great model. I said it will be bankrupt within 2yrs. My view was essential services should not be treated as commodities, they dont have the profit margins. Also I think it's unethical. BBI was top heavy with debt, it was clear on the balance sheet the only asset they had was good will.

Rule 1 good management with a track record

Rule 2 Cash in the bank

Rule 3 Institutional support (pref banks)

Rule 4 If you dont understand it dont buy it.

Rule 5 If the pe ratio is higher than 18 its probably over valued.

Rule 6 Can they survive a recession.

Rule 7 Never borrow to buy stocks at the top of the market.

Rule 8 If you cant hold it for 5yrs dont buy it.

Rule 9 How are they going to expand.

Rule 10 Are they realistic.

We live in a hot, volitile, fickel market where manny people are competing. This competition for market share has led to high risk taking behavior. Shares sometimes get valued at high pe ratios that are not justified.

A blue chip stock that only returns 2 to 5% on investment when banks return 6.3% for cash indicates the stock is overvalued.

Risk vs Reward