6 rules of investing

Here is a youtube video on 6 rules in investing.

For those who don't have 10 mins to watch the video, let me summarise for you:

Rule 1 Be a shameless cloner. That means follow the investment of top investors. (My comment: The method of following 13F fillings is interesting. However, we will miss out smaller companies as many large institution investors are unable to buy into smaller companies due to the liquidity issues).

Rule 2 Buy stocks that have moats. (My comment: Investment Moats tend to change over time. 'Newer' type of Investment Moats such as those in the disruptive economy tend to have no long term track record and could be small companies.)

Rule 3 You make money by waiting. Patience and the ability to wait is something most people do not have and if you can wait, you already have a competitive advantage. (My comment: Most investors do not have patience. That's why trading is so attractive.)

Rule 4 Don't engage in short-selling. Why invest in something that has the maximum gain of doubling your investment and the company going bankrupt at the same time? (My comment: Another reason I do not encourage short-selling is that the profit is limited to 100% while the lost is unlimited. For investment to work, the downside should be limited and upside unlimited.)

Rule 5 Be like a businessman. Take low risk to get high return. (My comment: I always encourage my clients to invest like a businessman. A businessman focuses on internal and external factors. Internal factors are the company's cash flow, earnings quality, inventory, employee's happiness level, etc. External factors are competition, regulation, politics, etc).

Rule 6 Have a checklist. (My comment: for financial planning, the 'checklist' is the high level financial plan and the investment is merely a tool to reach the financial goals. Without a high level financial plan, you will have no idea whether the investment is suitable to your lifestage, current needs and future needs).

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