Sunday, May 12, 2013

Bernard Baruch's Rules for Successful Investing

To say the least, these are old rules.

This morning I ran across Bernard Baruch’s ten rules for successful investing. (via Barry Ritholtz) As you know, Baruch was one of the most successful investors of the first half of the twentieth century.

Since I had not seen all of them before, I imagine that others have also missed them.

One might preface them with another of Baruch’s quotes: “The main purpose of the stock market is to make fools of as many men as possible.” It smacks of cynicism, but it is a useful antidote the view that the markets are in the business of making you feel good about yourself.

Anyway, here’s Baruch’s Top Ten List:

1. Don’t speculate unless you can make it a full-time job.

2. Beware of barbers, beauticians, waiters — of anyone — bringing gifts of “inside” information or “tips.”

3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.

4. Don’t try to buy at the bottom and sell at the top. This can’t be done — except by liars.

5. Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.

6. Don’t buy too many different securities. Better have only a few investments which can be watched.

7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.

8. Study your tax position to know when you can sell to greatest advantage.

9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.

10. Don’t try to be a jack of all investments. Stick to the field you know best.


Dennis said...

I would also add that if you have some money you don't care that you might lose it, no matter how small, do some weighted average investing. Do the research. I have done this over the years and they have all, up to this point, done well.
One of them had dropped to lower than $5.00 per share and is now exponentially higher. Another was in a risky medical device company.
I call this money, play money. Do not do this with money you really need for other types of investments or survival needs.

Anonymous said...

Stuart, do you invest, coach investors, or both?

Stuart Schneiderman said...

I do invest, but I do not offer investment advice.