Tags

,

This useful book – with case studies on Goldman Sachs, Home Depot IBM, etc. – ends with a letter to a younger investment manager that includes the following 25 points (I only summarized these points ; the book includes many further insights):

  1. Be careful not to let your mind acclimate to a present circumstance, and then lose perspective.
  2. Beware of projecting past or present trends into the future.
  3. Beware of seeking out information that reinforces your existing points of view.
  4. Intensively research stocks and industries, and pay attention to the quality of the information.
  5. Be wary about basing investment decisions on predictions about the economy, interest rates, or stock market.
  6. Pay more attention to what managements do than to what they say.
  7. Be particularly wary of projections made by managements ad others who have vested interests.
  8. Be wary of companies that largely have been “put together” through recent acquisitions.
  9. Be aware of the laws of supply and demand.
  10. Be wary of stock recommendations made by others.
  11. Do not be overly influenced by the media.
  12. Avoid over-relying on numbers and models.
  13. Separate your analysis from your emotions.
  14. Seek simplicity.
  15. Realize that the trees do not grow to heavens.
  16. Knowledge of where the market is selling relative to its historical metrics often is helpful.
  17. Every investor must analyze risks of permanent loss and must decide how much risk he is willing to assume.
  18. While an investor should work hard to avoid permanent loss, he must guard against being so risk averse that he turns down too many promising opportunities for fear of making a mistake.
  19. Be prepared and willing to change your mind if your initial decision was flawed or if circumstances change.
  20. Invest for the longer term and de-emphasize the significance of short-term results.
  21. Do not attempt to “time” the market.
  22. Try to remain relatively fully invested as long as you can find a sufficient number of attractive securities.
  23. Try to generally think and act positively and optimistically.
  24. Structure a concentrated portfolio, yet a diverse portfolio.
  25. Be relaxed and invest with a passion.