Saturday 9 June 2012

The real world of investing


There are 10,000 publicly traded companies in the US markets.  There are 1,000 publicly traded companies in the KLSE.  With so many companies out there to pick from, only a small minority will be suitable as LONG-TERM INVESTMENTS.

This means the great majority of companies you investigate will be unsuitable.  You should take some pains to screen for companies that meet your requirements.

If you don't realize this up front, and accept discouragement as a normal part of the process, you may tire of discarding company after company and give up.  Worse yet, you may relax your requirements and accept companies that don't come up to snuff. Either way, you'll lose.  

Remember:  You need to own only about 10 to 20 good stocks - that's all!  And there are plenty of companies to choose from to populate your portfolio.  So be patient and disciplined.  

Assemble a list of companies based on your quality criteria.  You will usually find that even if performance on your quality criteria has persisted - and this is usually the case for most - you'll find the price for many of these stocks unattractive.  When you first assemble this list, make no effort to assess the price, just the quality.

Some of these companies have been around a long time and are familiar to you: others are not so well known.  All have been publicly traded for at least 5 years on the major exchanges and all have revenues of more than $100 million.

The moral of the story here is that you should keep the faith.  There are plenty of fish in the sea for you, even though the sea is enormous and there are many more losers than winners.

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