Best Investing and Trading Advise from Investment and Trading Professionals

Below is an article that was on the web in early 2012. The name of the article was, Can You Sum Up Your Investing Philosophy in 10 words. The author asked many top investors and financial thinkers. Here is their advice, in 10 words or less.

Determine value.  Then buy low, sell high.  ;-)

—David Herro, chief investment officer for international equities, Harris Associates, and manager of Oakmark International Fund

If everybody wants it, I don’t. Avoid crowds.

—Gus Sauter, chief investment officer, the Vanguard Group

Other people are smarter than you think they are.  Index.

—Laurence B. Siegel, research director, Research Foundation of the CFA Institute

Risk means more things can happen than will happen.

—Elroy Dimson, expert on long-term stock returns, London Business School, and co-author, “Triumph of the Optimists”

Invest for the long term and ignore interim aggravation.

– Charles D. Ellis, director, Greenwich Associates, and author, “Winning the Loser’s Game”

100% of business value depends on the future.

—Bill Miller, chairman and chief investment officer, Legg Mason Capital Management

Plan for the worst. Hope for the best.

—Robert Rodriguez, managing partner, First Pacific Advisors

Control what you can: your savings rate, costs, and taxes.

– Don Phillips, president, fund research, Morningstar

The less portfolio management costs, the more you earn.

—Burton Malkiel, professor of economics emeritus, Princeton University, and author of “A Random Walk on Wall Street”

Own competently managed, competitively advantaged businesses at discounted prices.

—O. Mason Hawkins, chairman and chief executive officer, Southeastern Asset Management

Do the math. Expect catastrophes. Whatever happens, stay the course.

– William J. Bernstein, Efficient Frontier Advisors, and author, “The Four Pillars of Investing”

Fallible, emotional people determine price; cold, hard cash determines value.

—Christopher C. Davis, chairman, Davis Advisors and co-manager, Davis New York Venture Fund

Save. Invest long-term. Compounding returns builds. Compounding costs destroys. Courage!

–John C. Bogle, founder, the Vanguard Group

Are you smarter than the average professional investor? Probably not.

– William F. Sharpe, emeritus professor of finance, Stanford University, and Nobel Laureate in economics

Spend less.  Diversify globally.  Own whatever’s feared, shun whatever’s beloved.

– Robert D. Arnott, chairman, Research Affiliates LLC

In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, ‘This too will pass.” Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.”

—Benjamin Graham, “The Intelligent Investor,” Chapter 20.

I’ve read, own, and reviewed many investment and trading books. 

Below is the advice from some of these books I’ve read and reviewed.

The Money Masters, John Train’s The Money Masters is an old classic, and it profiles, provides investment philosophies, and stories about of some of the best money managers.

Have a discipline. Pick several style and know them well. Know when it is working and sit things out when it’s not. Any successful approach is bound to fail in due course.

Flexibility

Be realistic

Be patient

Market Wizards, Jack D. Schwager

Market Wizards is another book about successful money managers, but also includes stock and commodity traders.

The market isn’t always right

Be Flexible

Know what you’re doing very well, discipline, position

Look for Hysteria and go against.

Never put more that 5% into a trading idea

Understand risk management

Under trade

Don’t personalize the market

Place a stop at a point if reached, will indicate that the trade is wrong, not at a determined primarily by the maximum dollar amount you are willing to lose per contract.

Willingness to make and accept mistakes

Don’t risk significant amount of money in front of key reports

If you don’t place a trade you can’t win, if you lose everything you can’t trade.

All great trades are seekers of truth.

Have conviction but have flexibility to know when you’re wrong and exit position.

Admit when you’re wrong.

Learn to take losses.

Don’t let material goals interfere with your trading.

Make sure odds are in your favor.

Don’t trade if you have other stresses in your life.

Act independently

Soros on Soros

There is no shame in making a mistake, only in failing to correct it.

Classics an Investors Anthology

It is impossible to produce superior performance unless you do something from the majority.

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell

The time to sell an asset is when you have found a much better bargain to replace it.

Investment Gurus

Develop a good source of information flow and idea generation.

Hard work, if you look at 10 investment ideas you will find 1 good one, if you look at 20 you will find 2, if you look at 100 you might find 10.

Discipline

Focus

Intelligence

Hard work

Allot appropriate amount of time

Sell if the reasons why you bought the stock has changed, or look at each position as you bought today, would you still buy it now, if you cannot say yes, consider selling.

Winning On Walls Street, Martin Zweig

Let your profits run and to cut you profits

You must houseclean your stocks periodically

Buy strength, sell weakness, and stay in gear with the tape.

Don’t fight the tape. The trend is your friend.

Don’t fight the Fed.

Be on the right side of the major moves

Don’t swim against the tide.

Discipline

Flexibility

Contrarian Investment Strategies: The Next Generation David Dreman

Do not make an investment decision based on correlations, they will normally shift or disappear.

Analysts’ forecasts are usually optimistic. Make the appropriate downward adjustments to your earnings estimate.

Positive and negative surprises affect best and worst stocks in diametrically opposite manner.

Favored stocks underperform the market, while out-of- favor companies outperform the market, but reappraisal often happens slowly.

Buy contrarian stocks because of their superior performance characteristics.

Buy solid companies currently out of market favor, as measured by their low P/E, price to cash flow or high yields.

Diversify

Buy during a panic, don’t sell.

Don’t expect the strategy you adopt will prove a quick success in the market; give it a reasonable time to work out.

A given in markets is that perceptions change rapidly.

Stocks for the Long Run Jeremy Siegel

Diversify

There is some evidence that contrarian strategies of increasing stock exposure when most investors are bearish and decreasing exposure whey they are bullish can improve long term results.

Small value stocks appear to significantly outperform small growth stocks.

There is significant evidence that many calendar anomalies persist over time.

Proper investment strategy is as much of a psychological as an intellectual challenge.

What Works on Wall Street, James O’Shaughnessy

A strategy’s risk is one of the most important elements to consider.

Buying Wall Street’s current darlings with the highest price to earnings ratios is one of the worst things you can do.

Last year’s biggest losers are the worst stocks you can buy.

John Neff on Investing, John Neff, S. L. Mintz

Reasons to Sell

• Fundamentals deteriorated
• The price approached our expectations
• Stick to a firm sell strategy

Buy on the cannons sell on the trumpets

Seek companies on the squash

Seek backdoor access to investment opportunities

Play to your strengths

Expand your horizons

The Complete Day Trader Jake Bernstein

Flexibility

Consistency

Patience

Self-Control

Accepting Losses

Frequent Analysis of Results

Do Your Own Research

Find Your Place

Set Goals

Keep a Diary

When In Doubt Stay Out

Do your homework

Monitor your performance

Beware of the dangers of pyramiding, adding increasingly larger positions as trade moves in your favor.

Be a contrarian

Barron’s Article Rules on When - and Why - To Sell

1. When you know you’re wrong head for the door.

2. Stock spikes up 90 degree angle

3. Sell on news

4. If you own penny or other low priced stocks, especially with no earnings, then sell when any news, rumor pushes them up quickly.

5. If the market is overvalued, consider selling some of your holdings.

6. Pyramiding your margin debt up against your equity profits in a bully market can lead to disaster.

7. If you own a good company in a troubled industry the odds are good that at best it will be a laggard.

8. When faced with disastrous news, don’t fool around, sell.

9. Once a major decline has occurred, consider selling your lowest-quality stocks and move into stronger companies with greater potential.

10. Take a loss if your stocks breaks its low for the year.

It’s When You Sell That Counts Cassidy

Stop trying to protect your ego; Focus on your capital

Understand subtle but strong psychological Impediments.

Overcome tax phobia

Recognize Crowd Psychology

Take Time Out

Accept the irrelevance of your personal cost price

Separate the stock and the company

Know what institutions are doing and adjust

Know the anatomy of a loss

Have a price objective

Expect rotational group rotation

If your using margin, understand fed and maintenance calls

Contrarian Investing, Gallea & Patalon

No stocks position should be more than 5% of the portfolio.

No industry or theme should be more than 20% of the portfolio.

Other signals to help with buy/sell decisions

• Business cycle
• Monetary policy and interest rates, inflation
• Stock valuations
• Sentiment indicators
• State of the market
• Political Cycle

My favorite quote, investment advice I read many years ago is: “each investment position is a seeker of truth” author is unknown. Your outlook for an investment that you bought and own should be based on of your due diligence, analysis. For instance, if you calculate the buyout price for a company, and it is bought out at the price you forecasted, your forecast turns out to be true.