Investment Rules

Investment Rules
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Introduction
In every field of life, there are some basic rules that must be followed for the participants or the parties taking part in them to be successful in it. Business and marketing fields are not exception to this and particularly when it comes to deciding where to invest and where not to, one must really be careful with the rules. This paper examines ten basic rules of investment which include; why an investor must defend some Stocks and not all, why an investor must not own too many names, why it is usually said that cash is for winners, why investors must never forget Bonds, why investors must never subsidize losers with winners, why investors must pay the Taxes, why investors must always diversify to control risk, why investors must their stock homework, why they must always expect and not fear corrections and lastly why investors must always be flexible.
Rule 1: Defend Some Stocks, Not All
Good investors normally invest in many business or stocks as a way of diversification and also to increase chances of making more profits. In some cases when the stocks are doing very well in the stock exchange, the investor is happy and will not need to take any action but to simply sell the most profitable ones and order some more. However, in cases where a bad wave strikes and the stocks start to deteriorate, the investor starts to panic and if ill advised he may end up experiencing the greatest loss of his life. This rule therefore cautions investors when such situations arise by telling them that not all stocks should be defended, but only a few of them. This rule holds that investors should always rank all their stocks by priority and identify those that are most important and also those that will be given first priority when the investor decides to sell some. The rule is against investors defending all their stocks in a bid to save all of them because doing so will be more risky than when the investor gives up some in order to cover the most important ones or the ones which are more valuable.
Rule 2: Don't Own Too Many Names
This rule holds that investors should never own took many stocks or names to themselves. It is not that owning too many names is a crime or an offence but for the good of the investor and his money, just a few stocks in which they can have total control over is enough. Of course this can vary from one investor to the other as some will consider ten names to be enough for them while others will consider only five to be sufficient and enough for them. The underlying rule is that investors should own the number of names which they can have control over and which they can know inside out so that they can control them effectively.
Rule 3: Cash Is for Winners
This rule generally holds that investors should value their money if it promises them more results than investing it in stocks that are not promising. Many a times, investors have been propelled to think that any investment is good investment, but this rule cautions such investors by telling them that investment is only good if the stocks or the market in general promises good results, otherwise investors should walk away with their money. Thus, when they walk away with their money they will be considered winners as compared to when they invest blindly or ignorantly and loose all the money. Similarly, investors must not wait until the bad economy or dying company completely diminishes their investments as they can sell the stocks immediately and have it in their pockets.
Rule 4: Don't Forget Bonds
Bonds are an important factor in as far as investing is concerned. Bonds work in the same direction as stocks but in the opposite direction as interest rates of the country. Investors are asked and it should be more of a rule to them to remember bonds so that they can determine how trends are going and use that to make important decisions for themselves and also for their clients. Remembering about bonds will also help them know the big companies in which they have invested in behave and thus be able to draw concrete decisions from that.
Rule 5: Never Subsidize Losers with Winners
Typical investors analyze their stocks and make decisions tha...