Louis Ehrenkrantz started off being an English teacher but then turned the horse around and went to Wall Street and spent 40 years there before dying at an early age of 65 in 1999 before the dot-com bubble.
The seven rules that he invested according to were fairly simple to their nature but the easier it is the easier it also is to follow.
- Develop a large appetite for reading; it will hone your instincts for finding successful companies.
- Don’t over-diversify; ten stocks, in at least three sectors, are enough for the average investor.
- 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.
- Look for top-quality, out-of-favour companies; look for companies that produce an array of high-quality products and/or services.
- Don’t worry about earnings if a company makes a popular product; strong earnings growth will follow.
- Don’t tinker with your portfolio; check your portfolio’s performance only once or twice a year.
- Don’t be afraid to hold cash; it’s okay to be prepared to purchase stocks with beaten-down prices after a correction.
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