The 80/20 book guy makes some interesting observations about stocks.
While the book covers many other ideas here is a summary from the Money section specifically about stocks.
1. Look to earn more from investments than from job income
2. Concentration and long term holding
3. Look for accelerated earning growth
4. He just does not sell winning stocks.
5. He sells stocks once they fall 15% from the top no matter what.
He makes the point that over the long run no one loses by holding an index fund or by holding a basket of stocks. However, this principle does not apply to a single stock. He has seen multiple investors lose a lot of money on a single stock by refusing to sell.
I find myself vehemently in agreement with 5. While so far I'd sell a stock once I lose 20-30% never really thought of the idea of selling at a fixed percentage below the top.
Edited by subu76 - 25/Jun/2012 at 9:16am
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I guess that is the problem with any hard number.
