Panic The stock market offers great chances to make money when the big institutional investors are running for the exits and driving stock prices lower. The same kind of windfall can occur when the institutions are bidding up the stock price as they go into a heavy buying mode. (This is nothing more than saying that when market forces are pushed to extremes it causes overbought or oversold conditions very few people will profit in a panic you need the ability to get in or out in fast moving markets with favorable fills on your orders.)Avoid diversification you must bear the risks. Diversification offers mediocre returns. The banks are a safe place to put money. The stock market is not. (Good point, the best way to distance yourself from the pack is to pick the best performer, not the best one hundred it diverts focus from the real aim taking chances on the best candidates for outstanding performance.)The authors view let the winners get away. Go after prominent stocks that have fallen. (The author doesnt have the focus to search the marketplace for the best candidates for outstanding performance and when these stocks become known in the marketplace the author chooses to ignore them. Some of the best gains have been stocks that seemed like they already went up incredibly far, incredibly fast. This type of investor is always going to miss the best stocks to creating wealth in short amounts of time, such as Dell, Amazon, Yahoo, Taser, Google, and any other companies that were hot at one time but faded the point is not that the companies didnt provide long-term stock price growth, its that there is a short window of time to act before high prices cause higher prices and the kind of gains that separate one from the pack.)Timing is not everything. (Its almost everything the right stock at the wrong time does little good because it ties up capital that can be used more effectively elsewhere.)Nobody wins like an insider does.The unknown there are still undiscovered opportunities that have not been brought to light. When invisible stocks attract liquidity and buyers to them (It doesnt matter how promising the company is that you invest in – what validates and creates wealth is when other people in the marketplace believe it to be of worth; voting is done with dollars, thats where liquidity and buyers come into play; they have to have a reason to be attracted.)Long-term investments. It is, after all, the best investment strategy. Buy low, sell high it requires all the guts and courage to practice it to know just when a stock is actually selling at a low price and to have the discipline and conviction to buy it. (I would qualify that long-term investments may be the best strategy for those that are part of the crowd of mediocrity that cannot go for outstanding returns without damaging themselves the best strategy is not long-term investments no investment class throughout the long-term, such as a thousand years does particularly well. The best investment strategy has been having a keen understanding of the marketplace and taking the risk associated with it to benefit from short-term inefficiencies and imbalances. Anything that runs up in price and allows you to sell it for significantly more to someone else with low transaction costs and little or no tax consequences is the best investment. The thing about it is its not obvious to any of us until much later.)
The author claims cash reserves should be from 10 to 20 percent of your portfolio. The most important point is missed you are going to need all the capital you can get to do wonders in the stock market even when prices are depressed and due for a rebound; the critical element is to dispose of all investments before price changes significantly reduce your capital. The author claims the distinction of having a stock picking record that beats the broad market averages since his picks were tracked in Business Week from 1985. The market has been in a huge upswing anyway throughout most of that time so I dont see it as much of an accomplishment unless one has compounded his or her money at a much higher rate, and perhaps with less risk. Where is the money? Stock picking is one thing but backing your decisions with real cash is another if the trading account and bank records are missing its misleading to think that any of this expertise has translated into actual profits. Heres what the author recommends as great stocks to own:
1. Apple2. Boeing3. CVS4. Genetech5. JP Morgan Chase & Co.6. Petroleo Brasileiro S.A.7. Pfizer