42 Rules of Sensible Investing: A Practical, Entertaining and Educational Guidebook for Personal Investment Strategies

113 Pages·2008·0.35 MB·English

by  Leon Shirman

42 Rules for
Sensible Investing
By Leon Shirman
E-mail:
Copyright © 2008 by Leon Shirman
All rights reserved. No patent liability is assumed with respect to the
use of the information contained herein. Although every precaution
has been taken in the preparation of this book, the publisher and
author assume no responsibility for errors or omissions. Neither is any
liability assumed for damages resulting from the use of the
information contained herein.
First Printing: December 17, 2008
Paperback ISBN: 978-1-60773-008-8 (1-60773-008-1)
Place of Publication: Silicon Valley, California, USA
Library of Congress Number: 2008940963
eBook ISBN: 978-1-60773-009-5 (1-60773-009-X)
Trademarks
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Warning and Disclaimer
Every effort has been made to make this book as complete and as
accurate as possible, but no warranty of fitness is implied. The
information provided is on an “as is” basis. The author, contributors,
and publisher shall have neither liability nor responsibility to any
person or entity with respect to any loss or damages arising from the
information contained in the book.
If you do not wish to be bound by the above, you may return this book
to the publisher for a full refund.
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Praise For This Book!
“This book condenses enough wisdom into these 42 straightforward
rules to save investors years of learning through costly experiences.”
Abbott J. Keller, CFA
Chief Investment Officer
Kestrel Investment Management Corporation
“42 Rules for Sensible Investing is a clear, easy to read, objective and
balanced review of the basic fundamentals of investing. It is ideal and
essential for the novice and a helpful reminder for the experienced
investor.”
Bert Frydman, Author and Consultant
Former Chairman of the Board
Valley Credit Union
“The book provides a great summary of investment techniques in
concise and understandable form. A must read for anyone who
doesn’t have time to go through voluminous tomes on investing.”
Vieta Rosenberg, CPA
Profit Factor
“Valuable and actionable advice for both novice and experienced
investors delivered in enjoyable and easy to read manner.”
Bryan Koffman
General Partner
PanTerra Investments
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Publisher
• Mitchell Levy
http://superstarpress.com/ and http://happyabout.info/
Executive Editor
• Laura Lowell
http://42rules.com/
Cover Designer
• Cate Calson
http://calsongraphics.com/
Layout
• Teclarity
http://teclarity.com/
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Dedication
To Lilia, for her boundless optimism and steadfast belief in my
abilities.
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“Live long and prosper”
Traditional greeting of Vulcans, who, by virtue of living by logic and
reason, without interference from emotion, must be very good
investors.
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C o n t e n t s
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Intro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Rule 1 Rules Are Meant to Be Broken . . . . . . . . . . . 4
Rule 2 Compound Interest Is Good . . . . . . . . . . . . . 6
Rule 3 Invest for the Long Term . . . . . . . . . . . . . . . . 8
Rule 4 Understand Mutual Funds . . . . . . . . . . . . . . 10
Rule 5 Consider an Index Fund . . . . . . . . . . . . . . . 12
Rule 6 Hedge Funds: Read the Fine Print . . . . . . . 14
Rule 7 You Can Beat the Market . . . . . . . . . . . . . . . 16
Rule 8 Market Declines Happen . . . . . . . . . . . . . . . 18
Rule 9 Market Timing Doesn’t Work. . . . . . . . . . . . 20
Rule 10 Stay Invested at All Times. . . . . . . . . . . . . . 22
Rule 11 Keep Records of Your Performance. . . . . . 24
Rule 12 Set Realistic Expectations. . . . . . . . . . . . . . 26
Rule 13 Minimize Your Expenses . . . . . . . . . . . . . . . 28
Rule 14 Control Your Emotions . . . . . . . . . . . . . . . . 30
Rule 15 Be Patient . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Rule 16 Keep It Simple. . . . . . . . . . . . . . . . . . . . . . . . 34
Rule 17 Buy What You Know . . . . . . . . . . . . . . . . . . 36
Rule 18 Buy Businesses, Not Stocks. . . . . . . . . . . . 38
42 Rules for Sensible Investing vii
Rule 19 Boring Could Be Exciting . . . . . . . . . . . . . . . 40
Rule 20 Be Different . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Rule 21 Select Companies of the Right Size . . . . . . 44
Rule 22 Know How Many Stocks to Own . . . . . . . . . 46
Rule 23 Beware of Over-diversification. . . . . . . . . . . 48
Rule 24 Know When to Sell . . . . . . . . . . . . . . . . . . . . 50
Rule 25 Re-evaluate Your Portfolio . . . . . . . . . . . . . . 52
Rule 26 Don’t Listen to Market Pundits and
Analysts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Rule 27 Concentrate on Your Stocks . . . . . . . . . . . . 56
Rule 28 Recognize and Learn from Your
Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Rule 29 Your Winners Will Overcome Your
Losers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Rule 30 Insider Buying Is Good . . . . . . . . . . . . . . . . . 62
Rule 31 Learn to Value Stocks . . . . . . . . . . . . . . . . . . 64
Rule 32 Sometimes, It Is OK to Do Nothing . . . . . . . 66
Rule 33 Look to the Future, Not to the Past . . . . . . . 68
Rule 34 Use, but Don’t Abuse, Margin . . . . . . . . . . . 70
Rule 35 Avoid Betting on Options . . . . . . . . . . . . . . . 72
Rule 36 Consider Selling Options for Extra
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Rule 37 LEAP-Frog Your Returns . . . . . . . . . . . . . . . 76
Rule 38 Don’t Rely on Technical Analysis . . . . . . . . 78
Rule 39 Avoid Frequent Trading . . . . . . . . . . . . . . . . 80
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