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| Lesson 1 |
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| Investment Philosop |
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| Historically the most successful investors have been those that have employed the following guidelines. |
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| 1. Invest regularly regardless of market outlook. |
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The markets trend for decades has been upward at an average annual rate of 10% despite occasional cycles of boom, recession, depression, and recovery. Risk in minimized when shares are puchased with the intent of holding them for a long period. |
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| 2. Reinvest all earnings. |
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This allows you to maximize your profits through compounding. |
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| 3. Invest in growth companies. |
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Buy shares in businesses whose sales and earnings are moving ahead faster than the gross domestic product (GDP), and whose records suggest they will be far more valuable five years in the future. |
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| 4. Diversify to reduce risk. |
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Diversification is a basic principle of investing. It is impossible to predict which stocks or industries will do well in the future. You have to spread the risk - and the opportunity. By diversifying you will obtain an better average return on investment (ROI) |
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| When you make regular purchases with a set sum, regardless of the market's level, you are utilizing an idea called dollar cost averaging. |
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| When you buy carefully, you should sell very seldom. When you own quality companies with continuing high growth potential, you should continue to hold. When a company becomes grossly overpriced , you should sell one quarter to one third of your profits. |
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