Instead, buy cheaper shares and add reliable securities to your portfolio based on your research. Do not sell in times of crisisįisher would say the worst thing you can do is to sell your securities in times of crisis. If you truly understand your stocks and have more data points, you will be better able to make informed decisions. This means mitigating risk by limiting the unknown factors.
Secondly, if there's a market plunge, but you have strategically selected your stocks, the price decline will be less severe. Should you focus more on trends in the stock market or on your stocks? According to Fisher, the latter is more important for two primary reasons. Aim for an overall level of diversification to allow room for error, but not so much as to indicate the insecurity of its owner. Each of these stocks should be well-researched and manageable. Fisher’s rule of thumb is to aim for 7 to 12 stocks. Although it is a time-tested strategy for mitigating risk and realizing the highest returns, he advocates balancing diversification and over-diversification – not having too many stocks in your portfolio. Have a manageable number of stocksĪnother key insight from Fisher is not to overestimate diversification. You should then reevaluate its dynamics over a longer timeframe to determine whether it is worth investing in. More data points are necessary to help investors fully analyze the stock and its potential. Fisher was aware that current good growth or a good P/E (price-to-earnings ratio) multiple was not an accurate indicator of future growth of a particular stock. Use available dataįisher lived in a period when financial data was not as accessible, but he was ahead of his time because he knew even then that data was king. This approach is still in line with Fisher’s overall long-term strategy rule. These companies might allocate spending to research, sales, or other activities to improve their future by investing in themselves.
Ideally, these companies would also have the best margins in their industry.įisher mentioned that the exceptions to his rule are healthy young companies that are foregoing profits today for accelerated growth in the hope it will pay off tomorrow. He cautioned investors to look for healthy margins across extended timeframes, such as a series of years. As with many value investors, Fisher believed that companies with long-term profit strategies are more likely to deliver sustainable results.
0 kommentar(er)
