-
Do
not pay more than 1% commission for buying and
selling and do not pay any depot charge. Also
ensure that the account is insured by a
compensation fund.
-
Shares are fact and emotion and emotions cause
bigger movements.
-
Rises and falls are usually overdone and often
end with a crescendo of high volume.
-
The
following three “Cs” are most important and
diversify between them:
COUNTRY
CURRENCY
COMPANY
-
A
rule of thumb for valuing a share is as follows:
If for instance the corner shop makes a profit
of 70.000 EUR per year, you would probably be
prepared to pay 300.000 EUR for it, i.e. five
times annual profits which is a price earnings
ration of 5. This KGV or P/E ratio is the single
most important way to value a company or share.
-
Many
people buy shares because they like the company.
Shares should be bought for increasing earnings
which later reflect in higher share prices. Many
Mercedes owners in the last years bought Daimler
Chrysler shares and now the company has declared
losses. Do not fall in love with a share. Take a
loss and admit to yourself you were wrong. Be
cynical and remember turnover is ego and profit
is sense.
-
Read
and watch intelligent media. I suggest THE
FINANCIAL TIMES DEUTSCHLAND or its international
edition, the HERALD TRIBUNE (the Weekend Finance
Section) and BOERSE-ONLINE. On TV watch CNBC for
the US and Bloomberg Germany as well as N24 for
German Markets.
-
Do
not normally have more than 10% of your
portfolio in any one company, or more than 25%
in any one industry, or more than 50% in any one
country and 10 to 15% in a Money Market Fond
(for example: 50% US$, 50% is fine).
-
At
5% interest compound it takes 14,5 years to
double your money.
-
Interest rates up, both bonds and shares fall!
Interest down, bonds and shares rise!
-
Do
not pay more than “10" above the foreseen
earnings rise per share, i.e. if earnings are to
rise by 20 % do not buy at a Price Earning ratio
above “30".
-
Be
tax efficient! Off-set losses against gains.
Defer taking gains until next tax year.
-
If a
holding rises 100 %, automatically half it.
Conversely, if a holding falls 50 %, consider
selling or US$ “cost averaging”.
-
Select the right company and broker for your
needs. Do not be afraid to use two brokers, one
for internet and one to speak to. Consider
having a broker in another country.
-
Only
buy funds if:
you have less than 70.000 EUR to invest if the
industry or geographic area are high risk, i.e.
Biotech, Internet and Emerging Economies.
-
Do
not be afraid to have up to 15 % of your
portfolio in high risk shares.
-
Do
use warrants or options to profit from excessive
falls or rises as a way to insure the list.
-
Do
not normally buy shares in a loss making
company, unless it will make profits within 2
years, and do not buy shares with a P/E (KVG)
above “80".
-
Be
consistent with your investment practice.
“Changing horses” half-way does not work.
-
We
never know when we die, so make sure in your
"last will" that the correct people inherit the
money and know how to handle it.
