Thursday, 28 January 2010

An equally important strategy: Stay within your circle of competence.

The other term in their strategy is equally important.  This is what the Schlosses shared.

"We don't buy derivatives, indexes or commodities.

We don't short stocks.  We have in the past, and have made some money, but the experience was uncomfortable for us. 

We don't try to time the market, though we do let the market tell us which stocks are cheap.

We did invest in bankrupt bonds at one time, and if the situation presented itself to us, we might again.  But that field has become crowded over the years, and like most value investors, we don't want too much company.

We stay clear of ordinary fixed income investments.  The potential returns are limited, and they can be negative if the interest rates rise.

We buy stocks.  We invest in cheap stocks.

If we find a cheap stock, we may start to buy even before we have completed my research.  We have at least a rudimentary knowledge of many companies and we can consult Value Line or the S&P stock guide for quick check into the company's financial position. 

We believe the only way really to know a security is to own it, so we sometimes stake out our initial postion and then send for the financial statements. 

The market today moves so fast that we are almost forced to act quickly."

No comments: