First rule: develop a large appetite for
reading; it will hone your instincts for finding successful companies.
Second
rule: don’t overdiversify; ten stocks, in at least three sectors, are
enough for the average investor.
Third rule: stick with your winners and sell
your losers; do not automatically sell when a stock hits a target price, but
continue to hold it as long as it performs well and has good prospects for the
future.
Fourth rule: look for top-quality, out-of-favor companies; look for
companies that produce an array of high-quality products and/or services.
Fifth
rule: don’t worry about earnings if a company makes a popular product; strong
earnings growth will follow.
Sixth rule: don’t tinker with your portfolio; check
your portfolio’s performance only once or twice a year.
Seventh rule: don’t be
afraid to hold cash; it’s okay to be prepared to purchase stocks with
beaten-down prices after a correction.