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How to make money in the #stockmarket according to super #investor Walter Schloss
In 1994, Walter Schloss published his checklist which lists some of the factors which have to be considered for making money in the stock market. The factors as per their checklist are as follows:
In 1994, Walter Schloss published his checklist which lists some of the factors which have to be considered for making money in the stock market. The factors as per their checklist are as follows:
1. Price is the most important factor to use in relation to value.
2. Try to establish the value of the company. Remember that a share of stock represents a part of a business and is not just a piece of paper.
2. Try to establish the value of the company. Remember that a share of stock represents a part of a business and is not just a piece of paper.
3. Use book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity.
4. Have patience. Stocks don’t go up immediately.
4. Have patience. Stocks don’t go up immediately.
5. Don’t buy on tips or for a quick move. Let the professionals do that, if they can. Don’t sell on bad news.
6. Don’t be afraid to be a loner but be sure that you are correct in your judgement. You can’t be 100% certain but try to look for weaknesses in your thinking. Buy on a scale and sell on a scale up.
7. Have the courage of your convictions once you have made a decision.
7. Have the courage of your convictions once you have made a decision.
8. Have a philosophy of investment and try to follow it. The above is a way that I’ve found successful.
9. Don’t be in too much of a hurry to sell. If the stock reaches a price you think is a fair one, then you can sell but often because a stock goes up by say 50%,
9. Don’t be in too much of a hurry to sell. If the stock reaches a price you think is a fair one, then you can sell but often because a stock goes up by say 50%,
people say sell it and button up your profit. Before selling try to reevaluate the company again and see where the stock sells in relation to its book value.
Be aware of the levels of the stock market. Are yields and P/E ratios high? If the stock market is historically high, are people very optimistic too?
10. When buying a stock, I find it helpful to buy near the low of the past few years.
10. When buying a stock, I find it helpful to buy near the low of the past few years.
A stock may go as high as 125 and then decline to 60 and you think it attractive. 3 years before the stock might have sold at 20 which shows there is some vulnerability in it.
11. Try to buy assets at a discount then to buy earnings. Earnings can change dramatically in a short period of time. Usually assets change slowly. One has to know much more about a company if one buys earnings.
12. Listen to suggestions from people you respect. This doesn’t mean you have to accept them. Remember it's your money and generally it is harder to keep money than to make it. Once you lose a lot of money, it is hard to make it back.
13. Try not to let your emotions affect your judgement. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.
14. Remember the working of compounding. For e.g., if you can make 12% p.a. and reinvest the money back,
14. Remember the working of compounding. For e.g., if you can make 12% p.a. and reinvest the money back,
you will double your money in 6 years, taxes excluded. Remember the rule of 72. 72 divided by your rate of return will tell you the number of years required to double your money.
15. Prefer stocks over bonds. Bonds will limit your gains and inflation will reduce your purchasing power.
16. Be careful of leverage. It can go against you.
16. Be careful of leverage. It can go against you.
If you enjoyed this thread and want more content on my learnings from super investors, let me know in the comments.
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