Contrarian rules part II

What feels today like a long, long time ago I published an article that I called Contrarian rules. This article contained the set of rules that David Dreman claim to be one of the best approaches to reach a high yearly growth on your investment.

Back in 2012 I read plenty of investment books and once I had started this blog I went back to them to dig out the advice or rules as they were given which lead me to the publication back in March 2013.

David Dreman and his contrarian rules seemed to fit very well to my personality. I know that I do not panic and I know that I do not care if the share price drops -50% after I have bought them. Based on this knowledge I thought that the unloved, out of favour companies would be my thing. I even named the blog after this investment strategy.

Addition to investment mistakes & to the rules

For a long time I have been thinking about how to deal with drops in stock prices of stocks that I already own. I was previously thinking about that when it drops 30% or 40% or whatever specific number then I should step in and buy more stocks. I have also done this pretty consistently in the past year which caused two things to occur:

1. I was not able to buy new interesting stocks that I actually wanted
2. They continued even further down

I will therefore add this issue as a running mistake for 2013.

The new suggestion for investment rules will therefore be... no matter how far it drops unless they are showing a quarter or half year report with good results I will not buy more of the stock. True I will miss some of upside but then at least the company is back on their feet when I step in with
more money again.

I hope this adjustment will improve my investment strategy.

What are your rules? Do you think this is a good addition for me?

Investment advice according to Louis Ehrenkrantz

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.

Investment advice according to Housel

A blogger at The Motley Fool called Morgan Housel put together a list of what he called 50 unfortunate truths about investing. The 50 points can be seen below. I found plenty of them interesting to read and that is why I want to add it to my collection of investing advice list.

Investment advice by Sir John Templeton

Sir John Templeton is one of the legendary investors due to that he was highly successful, he was a philanthropist and he was financially moving around all over the world. Went into the Japanese market when it was in the very bottom and generally said that there is always at least one market in the world that is currently selling below actual value. He usually then also went there. So from his point of view many of the markets in the south of Europe would be highly interesting today. Personally I have tried to dig through them a little but from what I have seen the healthy companies are still selling at a fair value and it was just the seriously bad ones that have dropped tremendously. Some of his advice are good and some I just tend to ignore.

The investment advice as given by Fisher

Fisher was a very successful American investor. I would highly advice that you take a look at my book list and read the book to understand the points. I like everything Fisher is saying and doing and I understand that he was highly successful I also realise that I have no chance of following up what he did and I therefore need to go a different approach.

Contrarian rules

In the Contrarian Investment Strategies: The Next Generation by David Dreman there were a set of rules that I wrote down. To understand these rules one really must read the very excellent book which I highly recommend. Especially one should read it after The Intelligent Investor by Benjamin Graham because then you will receive more figures, values and examples to what Mr. Graham was talking about.

Investment Mistakes Made 2012

I find that it is important to list the mistakes that I make. Each year I will therefore conclude with a post concerning the mistakes that I made.

Mistakes 2012:

My Set of Rules from Reading the Books

This post is a little bit complicated to make. I will bring it into the regular flow of the text but it will also be placed on the side as its own page. The rules will also change of time. New will be added and old ones might even be removed if found useless.

Many investors, Warren Buffett especially, is frequently saying that the first rule is not to loose money. The second rule is never to forget the first rule. I would say that this is highly personality based. Do you care more about winning or do you care more about not loosing? I care about not loosing. However I do not see how a rule saying to not to loose money will help me be to make better investment. Maybe later on in life when I am older and wiser I will be able to create fewer rules which will only be the two ones above, since all the others will be so obvious to me, but I am far from that point and need to more strictly regulate myself and my way of acting.

My never list: