Monday, 13 August 2012

Stock Investment tips from Philip A. Fisher

These are uncertain times in the stock market and the future looks set to be volatile as well as both the eurozone and the U.S. continue to struggle with a lack of growth and debt problems, to mention a few of the ongoing issues. It's especially during such times it's important to keep a cool head, to focus on fundamentals and do your homework. It also does not hurt to remember what some of the great stock market investors have to say about investment philosophy. Here are therefore some useful stock investment tips from Philip A. Fisher and his book "Common stocks and uncommon profits" to consider when investing in equities:

ü Buy into companies that have disciplined plan for achieving dramatic long-range growth in profits and that have inherent qualities making it difficult for newcomers to share in that growth.

ü Focus on buying these companies when they are out of favour

ü Hold the stock until either a) there has been a fundamental change in its nature or b) it has grown to a point where it no longer will be growing faster than the economy as a whole.

ü For those primarily seeking major appreciation of their capital, de-emphasise the importance of dividends. The most attractive opportunities are most likely to occur in the profitable, but low or no dividend payout groups.

ü Making some mistakes is as much an inherent cost of investing for major gains as making some bad loans is inevitable in even the best run and most profitable lending institution. The important thing is to recognise them as soon as possible, to understand their causes, and to learn how to keep from repeating the mistakes. Willingness to take small losses in some stocks and to let profits grow bigger and bigger in more promising stocks is a sign of good investment management.

ü There are a relatively small number of truly outstanding companies. Their shares frequently can’t be bought at attractive prices. Therefore, when favourable prices exist, full advantage should be taken of the situation. Funds should be concentrated in the most desirable opportunities. For individuals (in possible contrast to institutions and certain types of funds), any holding of over twenty stocks is a sign of financial incompetence. Ten or twelve is usually a better number.

ü A basic ingredient of outstanding common stock management is the ability neither to accept blindly whatever may be the dominant opinion in the financial community at the moment nor to reject the prevailing view just to be contrary for the sake of being contrary. Rather, it is to have more knowledge and to apply better judgement, in thorough evaluation of specific situations, and the moral courage to act “in opposition of the crowd” when your judgement tells you you are right.

ü Success greatly depends on a combination of hard work, intelligence and honesty.

ü Sustained success requires skill and consistent application of sound principles.

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