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Top 6 Rules of Investing by World’s Top Investors

Updated on May 9, 2021 , 832 views

Successful investors are those who have learned from failures or from making the smart move. These people have gained great wealth and they have also listed down Investing rules for you to learn. However, the common aspect most experts point out is the fact that stock markets are always fluctuating, and the investor should bear that in mind.

Here are the top 6 rules to learn from top 6 investors:

Rule 1. It’s far better to buy a wonderful company at a fair price than buy a fair company at a wonderful price. — Warren Buffet

Warren Buffet, widely known as the world’s most successful investor has this great advice for investors. Identifying high-quality companies, knowing when to buy them and possessing the patience to hold on to them should be an investor’s goal.

When you identify a company that has had high profitability consistently and also has a competitive advantage, it is extremely likely that this company will continue to remain. This allows the company to reinvest profits to earn higher profits. Only after you have confidence in the company, you should evaluate the price.

Mr Buffet is one of the world’s richest individuals and he’s made wealth out of investments.

Rule 2. Invest for long-term. — Philip Fisher

Philip Fisher is known as the father of growth investments. He often approached investments as buying and holding. He has written several books on investment strategies including Common Stocks and Uncommon Profits which made it to the New York Times’ Best Seller’s list.

He mainly focussed on growth stock of small and large companies. According to him, the growth stock of start-ups or young companies offer the best possibility for future gain, He suggested that investors conduct a good amount of research before investing.

Rule 3. Do you really like a particular stock? Put 10% or so of your portfolio on it. Make the idea count. Good ideas should not be diversified away into meaningless oblivion. — Bill Gross

Bill Gross is the co-founder of Pacific Investment Management Co. (PIMCO). PIMCO Total Return funds are one of the largest bond funds in the world. Diversification is a common and efficient rule for investing. Making a profit in the market is about taking possibilities based on research. Do not be afraid to take chances when your research is pointing to a great investment.

Rule 4. Be patient with winning trades; be enormously impatient with losing trades. — Dennis Gartman

Dennis Gartman started publishing The Gartman Letter, which is a commentary of global Capital markets, Mutual Funds, hedge fund, brokerage firms, trading firms and more. He points out at the mistake investors usually make. Don’t sell at the first sign of profits and don’t let a losing trade getaway.

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Rule 5. But investing isn’t about beating others at their game. It’s about controlling yourself at your own game. — Benjamin Graham

Benjamin Graham is known as the father of Value investing and has also inspired Warren Buffet. In the investment industry, Mr Graham is also known as the father of security analysis and value investing. He encouraged the common-sense approach toward investing.

His investment strategy is about buying low and selling high. He focused on companies with above-average profit margins and sustainable cash flows. He believed in investing in companies having low debts. He would buy assets when there was a bargain and sell it when holdings were overvalued.

Rule 6. Know what you own, and know why you own it. — Peter Lynch

Peter Lynch is known as one of the world’s most successful business investors. He retired at the age of 46. Mr Lynch managed the Fidelity Magellan fund whose assets increased from $20 million to $14 billion within a period of 13 years. He advised that average investors should invest in companies they understand and are able to reason as to why they have invested there.

Invest in assets you know and understand rather than those you don’t understand. For example, if you understand pharmaceutical companies over others, invest in pharmaceuticals and have a reason why.

Conclusion

Investment is a skill that an investor has to incorporate within himself. It can be learnt if the investor is ready to research well before investing. The investor should understand the ups and downs in the market before investing and take risk accordingly.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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