Found this in my finance folder the other day:
1. Being contrarian doesn't just mean doing the opposite. The "contrarian" street-crosser gets run over by a truck.
2. Don't waste time mastering things that simply don't work (see lessons 10 through 12).
3. Technical Analysis: The only chart pattern worth noting is the jagged, but likely downward-sloping line of your savings if you follow this technique.
Don't completely agree with this one: To me, technical analysis is like alcohol, when used in moderation, it can actually be beneficial.
4. Albert Einstein allegedly declared compound interest "the most powerful force in the universe." High-interest credit card debt aims that force at your wallet. To get compound interest pointed in the right direction, save (and invest) early & often!
5. Those who know what they're doing make complexity seem simple. Folks who don't (or are trying to sell you something) make simplicity complex.
6. None of the time spent checking & rechecking Yahoo! Finance portfolios counts toward those
7. One of my favorite lessons from the poker table: Action is overrated. The best players (investors) are constantly weighing the opportunities, but rarely are they moved to act.
8. Vanguard founder Jack Bogle: "Time is your friend; impulse is your enemy."
9. Selling is overrated. Reason No. 1: We often sell potential multi-bagger winners that would more than make up for our losers.
10. In the hands of a good storyteller, almost every stock looks like a winner.
11. Most of us are too enamored with "so you're saying there's a chance" opportunities. A Hail Mary belongs on the gridiron or in the pew -- not in the brokerage account.
12. A great rule of thumb for buying a house. If a home is selling for 150 times the monthly rent (or less), it's generally a good deal. If it's selling for more than 200 times the monthly rent of a comparable property, you're better off renting."
14. Sir John Templeton's quote: "'This time it's different' are the four most expensive words in the investing language." The details change, but the basic storylines remain the same.
15. Options promise big gains in short time periods. The problem? About 3 out of every 4 expire worthless. Contrast that with a stock, which doesn't expire.
Definitely disagree with this one. 3 out of 4 do expire worthless, that's why you 'sell' out of the money covered calls on stable blue chips.
16. Keep a journal (or spreadsheet) of your stock picks, complete with your rationale for each move. Then look back on it to see if you were right. We may think we're good dressers, but all it takes is a high-school yearbook to prove otherwise.
17. Falling knives can be death -- especially when they're rusty. What this means is, that just because a stock is down substantially, doesn't mean it's a bargain.
I found this out 1st hand back in 2000-2001.
I’d see a stock that was $200 a share the year before, now trading at $50.
I thought to myself, wow what a bargain, so I’d buy 100 shares, & a month later it was $25. I tried to catch a falling knife, & got cut badly, but I learned a valuable lesson.
18. If you can learn quickly from your own mistakes, you're ahead of the game. If you can learn quickly from others' mistakes, you've won the game.
19. Be fearful when others are greedy, & greedy when others are fearful.
I'll add one more that I think is very important.
I subscribed to investors business daily one year back in the 90s.
They lean heavily on technical analysis, which I take with a grain of salt,
but they did make one very important point, at least for anyone who actively trades.
Set a stop loss of approximately 8.00% on every stock you buy.
