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Why I’m Now More Of A Buffett And Munger Type Investor

Summary Why I changed from Graham to Buffett and Munger. The importance of low hanging fruit in investing. What Growth as an Investor Really Is. Why You Need to Improve Risk Management. I’ve changed. How? It’s the same evolution that a lot of people have followed. Originally I focused purely on Ben Graham’s criteria and net nets. The beauty is that Graham’s techniques are easy to understand and follow because there is a lot of quantitative factors. Here’s one example of a Graham checklist you can study and follow. Graham came out with this back in his early days while running the partnership with Jerome Newman. ## Graham’s 10 Point Checklist An earnings-to-price yield at least twice the AAA bond rate P/E ratio less than 40% of the highest P/E ratio the stock had over the past 5 years Dividend yield of at least 2/3 the AAA bond yield Stock price below 2/3 of tangible book value per share Stock price below 2/3 of Net Current Asset Value (NCAV) Total debt less than book value Current ratio great than 2 Total debt less than 2 times Net Current Asset Value (NCAV) Earnings growth of prior 10 years at least at a 7% annual compound rate Stability of growth of earnings in that no more than 2 declines of 5% or more in year end earnings in the prior 10 years are permissible. ## Why It’s Important to Change for the Better It’s important to “adapt” your own version of this checklist because times have changed and this 10 point checklist may not work as well as it used to. And like a lot of people that have adapted and changed away from a pure quantitative approach towards buying quality assets, I have too. Buffett is the most obvious example here because he followed Graham’s investment style during his early partnership days until he met Charlie Munger. Of course, Buffett’s focus is now exclusively on buying quality businesses due to the size of Berkshire Hathaway, the compounding required to keep up growth and the special deals Buffett can strike up. But what’s the reason so many people morph from a Graham investor to more of a Buffett and Munger style of investing? My changes were made based on the need to keep things simple, chase low hanging fruit and improve risk management. Graham certainly did all these things, but when combining my temperament with Graham methods, I started digging myself into a hole without knowing it. So I changed. ## Keep Things Simple and Chase Low Hanging Fruit First The truth is that simple ideas and investments are not sexy. Some investments are so easy and obvious that people think it’s a dumb idea. Or, that low hanging fruit type investments have low upside so it’s not worth the investment. Being an early investor in Uber (Pending: UBER ) is much sexier than being an early investor to AT&T (NYSE: T ). The Fitbit (NYSE: FIT ) IPO is a clear indicator of how people want to be in on the next big thing. You get bragging rights if you say you got into the Fitbit IPO. You get more recognition from friends. You can talk and speculate about what the company is going to do to jet you to your next million. But I hold Amerco (NASDAQ: UHAL ). The parent company of U-Haul DIY moving trucks and storage. The investment thesis is simple. Their DIY truck rental business has a huge moat which is close to a monopoly. They own a ton of real estate for its storage business. They are family owned with large insider ownership. The bad family fights are behind them. They do not focus on quarterly performance or what Wall Street expects them to do. Their financials aren’t the easiest to understand because of the different parts and their focus on reinvesting for the long term. I used to think that I had to find complex stocks. That my goal was to find 1,000% potential returns. That would be awesome, but my focus was way off. I was reaching for the golden shiny apple at the top of the tree when there were very good apples hanging in front of my nose. I was simply ignoring them because it didn’t seem complicated enough. Well, here’s a note I received the other day. You should stop relying on your spreadsheet models and being so promotional with your website – it hinders your ability to analyze and think as an investor. I’ve followed you for quite a while, and you haven’t grown much in the past few years. – Anonymous I don’t know about you, but I’m perfectly content with having the skill to quickly know which stocks to pass on and which ones to dig into further. I’d rather know when something is overvalued or undervalued instead of just chasing a stock and falling in love with the story. Take it from Seth Klarman; Many investors are able to spot a bargain but have a harder time knowing when to sell. One reason is the difficulty of knowing precisely what an investment is worth. An investors buys with a range of value in mind at a price that provides a considerable margin of safety. As the market price appreciates, however, that safety margin decreases; the potential return diminishes, and the downside risk increases. Not knowing the exact value of the investment, it is understandable that an investor cannot be as confident in the sell decision as he or she was in the purchase decision. – Seth Klarman A 50 page complex stock analysis is not growth. Increased activity is not growth. Growth as an investor is knowing what to buy and when to buy. Growth is being able to pounce on a deal when it’s obvious. Growth is knowing how you react in certain situations preventing yourself from falling victim to it each time. Growth is being able to sit still and wait for an elephant to shoot instead of trying to shoot every rabbit. And all this comes from keeping things simple instead of trying to do too much. Graham did the same thing. Being such a savvy businessman and investor, Graham knew that he didn’t have to complicate things. He cut out the fat in investing and used discipline and simple ideas to generate his returns. ## Keeping Things Simple from a Baseball Perspective I’m a Seattle baseball fan which is painful. The team has been the definition of mediocrity for the past decade, but one of baseball’s best hitters is Seattle’s very own Edgar Martinez . In case you’re not a baseball fan, know that baseball is a game of failure. Most professional players can’t hit the ball more than 70% of the time. If you can hit the ball at least 3 out of 10 times throughout your career, you are considered elite. Edgar Martinez falls into this category. But what makes him so special? Two current hall of fame pitchers, Pedro Martinez and Randy Johnson, as well as future hall of famer Mariano Rivera have gone on the record saying that they thought Edgar Martinez was the best and toughest batter they’ve faced. Was it his homerun power? No. He had 309 and is no. 125 on the all time list. Was it his speed? No. He was slow due to an injury. It was simply because he was so disciplined, knew himself and limited mistakes that made him so difficult to get out. In recent interviews by Edgar, his approach was to keep things simple even when the stakes were high. Instead of trying to hit the game winning home run, his method was to stick to the basics, not get out and to keep the ball in play. Does that sound familiar? Edgar Martinez was happy with low hanging fruit by maintaining focus on the bigger picture – keeping the game alive in key situations even with a single. Edgar Martinez focused on protecting the downside and letting the upside take care of itself. Edgar Martinez didn’t go all out on one pitch that could blow up his team’s chance of winning. Edgar Martinez style of play wasn’t sexy and why he hasn’t been inducted into the hall of fame. Edgar Martinez is the baseball version of the investor I want to be. That means controlling the things that I can. Things like understanding how the stock fits within my overall investment objective calculating a valuation range to know when to act or not defining an entry price and exit strategy making better decisions with portfolio allocation ## The Need to Always Improve Your Risk Management Risk can be viewed differently between people, but when you boil it down, people don’t want to lose money. As Howard Marks puts it, I don’t think most investors fear volatility. In fact, I’ve never heard anyone say, “The prospective return isn’t high enough to warrant bearing all that volatility.” What they fear is the possibility of permanent loss. I too fear permanent loss of capital. The key to investing is knowing how to survive. That means at times playing conservatively, cutting losses when necessary and keeping a large portion of one’s portfolio out of play. – George Soros As I took up being a Graham first investor, one bad trait that I found myself creating was the focus on upside. Graham never emphasized the upside so this was purely a bad side effect created by myself. While focusing on the upside, I’ve made plenty of bad mistakes that come along with it. Trying to do too much all the time Over allocating on positions that I should have made much smaller Consuming too much information without putting the time to process it Fear of missing out on something Trying to pick up pennies in front of a bulldozer and the list goes on But one day, it finally sunk in. I finally knew and experienced what it meant to limit the downside. Protect the downside. Worry about the margin of safety. – Peter Cundill And another gem from Klarman. Interestingly, we have beaten the market quite handsomely over this time frame, although beating the market has never been our objective. Rather, we have consistently tried not to lose money and, in doing so, have not only protected on the downside but also outperformed on the upside. – Seth Klarman For me, that meant becoming a more Buffett and Munger investor. Slowing down my agendas and giving myself more time to think and process the information on hand. Look for strong moats. Look for good management. Look for businesses that I can hold for a long time without losing sleep over. I’ve changed for the better. Have you? Disclosure: I am/we are long UHAL. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

My Investment Worries: The Dollar, Large Caps, And More

Originally published on Dec. 28, 2014 Introduction Essentially investment risk is not a number. The price of risk failure is the foregoing of important funding plans. In that light your risk is not the same as my risk. Not only because we have different financial and personality resources, but also different time frames, which is why I developed the TimeSpan L Portfolios. These help isolate the impacts of risk failures; e.g., a disappointing short-term portfolio is different than one to help fund future generations. No matter what the planning time horizon of a portfolio, there is another major difference between two similar portfolios. In this age of optimization many portfolios project funding out of resources with little to spare for unexpected mistakes. For many there are no reserves for mistakes because the investor or his/her manager has supposedly identified all possible disruptions. Thus, they have created an expectation risk and need to examine what could go badly wrong with their expectations. I suggest the biggest impact of an expectation risk is likely to be found in the very assets that most investors have the highest level of confidence. Not only by nature I am a contrarian, I am a student of history that gets uncomfortable when there is excessive enthusiasm. My current worry risk is as follows: The US $ Large Cap Stocks Treasuries-US and some Others ETFs and other market structure changes These worries are not generally recognized in market prices, which I think they should be. Therefore I perceive significant market price distortions that don’t recognize that in the future something could go wrong in most portfolios. The worries Part of my worries is that few if any professional investors are publicly concerned about the concerns that are on my list. The (mighty) US Dollar For those of us who live in a competitive price environment we are very much aware of the price spread for similar, usually not truly identical, items. There are always reasons why the bulk of buyers and sellers can identify with the current price; e.g., availability, ease of transaction, easy to service, and other qualities of merit. As an entrepreneur I always wanted to be the high priced service sold to discriminating, great capital sources. My approach was that my successful pricing was a badge of high quality. I was conscious that this policy was holding up an umbrella over cheaper competition, but in the institutional world quality usually trumps price, within reason. Turning to the current valuation of the US$, the widening price spread versus all other major currencies suggests to me a leaky umbrella. Our current exalted position is not due to our virtuous qualities of protecting the purchasing power of our currency but rather it is due to the perceived decline in the value of other currencies. Some of the weaknesses in other currencies are self imposed by the deliberate mercantile policies of governments to help sales of their exports to the US. In a period of increasingly unpopular governments within their countries and with their neighbors, people are choosing to store some of their wealth in the US, behind its supposed two ocean fortress sitting on valuable natural and human resources. Because the US monetary leadership is having enough trouble attempting to manage the domestic economy and a current Washington political establishment that would like to isolate the US from others’ problems, there is no desire to establish the US dollar as the single world currency. Thus, at some future point the unannounced but real weaker US dollar policy is likely. In the future, various economies will start growing again and become attractive places for investment both by the locals and those from outside. Therefore it would be wise to hedge one’s longer term portfolio against continued dollar strength. A number of mutual fund investors have been doing this for some time. With the exception of the five trading days ending December 24th, traditional US mutual fund investors have been adding to their non-domestic holdings while redeeming some of their domestic fund holdings. (The latter move could very well be a normal pattern of mutual fund investors exiting for retirement and other needs. In most cases the domestic funds are the oldest of their holdings.) The leaky large-cap house If the US dollar is being held up by a potentially leaky umbrella, the investment houses holding large caps may start to leak soon. We acknowledged in last week’s post that in general large cap mutual funds in 2014 were performing materially better than smaller market capitalization funds. At present and historically there is no solid evidence that large cap companies will do better than smaller caps. The foreword of Charlie Ellis’s book, What it Takes , states that “None of the ten largest corporations in the U.S. economy in 1900 still ranked in the top ten 50 years later and indeed only three actually survived as companies.” In addition there is an article by JP Morgan Asset Management that since 1980 the S&P 500 has dropped 320 stocks or roughly 10 per year due to mergers, low volume, and an inversion of their tax headquarters. The problems that caused these results were more widespread with numerous large companies losing their advantage. Some possible victims of these deteriorations today might well be General Motors (NYSE: GM ), IBM (NYSE: IBM ), and Citigroup (NYSE: C ) among others. Turning to the large-cap stocks as distinct from the companies themselves, there are significant changes occurring. First the surge of stock price performance above the level of earnings progress may well be a warehouse effect. In the past when investment managers were concerned about not being invested in a market that was gently rising to flat before a perceived decline, they hid from their clients by investing in stocks of very large companies. AT&T (NYSE: T ) was the best of the warehouses with its $9.00 predictable dividend which hadn’t changed for about 40 years. Today, many of the tactical players have shifted to using Exchange Traded Funds (ETFs). In the week ending Christmas Eve approximately $1 billion flowed into two S&P 500 ETFs (net of their redemptions) out of $23.7 billion. Some of the inflows could be covering shorts. As of December 15th the SPDR S&P500 ETF (NYSEARCA: SPY ) had the second largest short position of 240 million shares. (The largest was our old warehouse name but applied to a different company, AT&T.) More on the changing market structure through ETFs and other derivatives below. The current market sentiment may well be changing from complacency to belief in a general recovery starting in the US and haltingly going global. One clue that this could happen would be that in 2015 small market capitalization stocks once against perform better than larger caps. We could even see some flows from the larger caps into smaller cap funds. Due to ETF players who are mostly faster trading institutions, we could see redemptions in various index funds as sentiment shifts from avoiding losses to picking exploding winners. Treasuries discipline Surprising the US deficit is declining due in part to the sequester in 2013, but it is still a deficit which does not include the off-balance sheet liabilities for various government programs. We have not taken the pledge that except in times of war to produce surpluses to retire our debt. One also needs to recognize our twin infrastructures in terms of roads and bridges as well as our growing educational deficit. We are not alone in our lack of discipline; most other countries are similarly addicted to deficit spending. For those of us who can choose not to invest in various governments’ securities, this lack of discipline is an additional imponderable. However, for our banking institutions it should be a considerable issue as banks in most countries must own local government paper. Often the various authorities treat government paper more favorably than commercial paper in terms of the level of reserves required. Thus, to some extent our whole financial system is exposed to the level of discipline applied to our treasury deficit machine. ETFs and other market structure changes Students of warfare often note that changes of weaponry change how battles are fought and won. Clearly the introduction of the English Long Bow and the Aircraft are two examples. In the investment marketplace battles, some rely on the most current weapon which is often not fully tested. The 1987 market fall is a good example of a market collapse that was not tightly tied to an economic collapse. In a somewhat overpriced market after a multi year rising market, many institutional investors felt secure because of their newly acquired weapon of “portfolio insurance.” This procedure was based on locked-in trades of securities and derivatives largely executed in Chicago. If markets were functioning normally with other investors using the various tactics of the past, a limited amount of portfolio insurance transactions apparently worked. However, as the decline accelerated, many institutions and some trading organizations withdrew from the market and so the locked-in derivative trades were working against each other in driving prices into a free fall. In 2014 and beyond, the popularity of derivatives, particularly ETFs, have grown and now often represent the bulk of trading in an emotional period. To put the size of the ETF power into perspective, the following points are worth noting: While the estimated net inflow into traditional US mutual funds for the Christmas Eve week was $12.8 billion, the highest since March of 2000, almost twice as much ($23.7 billion net) came in through ETFs. As Blackrock’s Larry Fink has been warning for some time, institutions are using ETFs instead of futures to speculate. There are roughly 250 authorized participants in the creation and redemption of ETFs. In many if not most cases these participants are acting for institutional clients. Some of the participants’ purchases may be to aid in setting up short positions or providing securities to meet share lending requirements. To put the importance of the shorting of ETFs shares in perspective, it is worth noting as of December 15th seven of the largest forty short positions on the New York Stock Exchange stocks were ETFs. As of the same day, nine of the thirty largest changes in short positions were for ETFs. Because of particular interest in the S&P Biotech ETF, the short position would take 17 days to cover. The use of derivatives in both fixed income and currency trading is extensive. Some of the regulators and I are wondering whether several of these new weapons will blow up certain users and possible counterparties in the heat of battle. How does one live with the worries? One must recognize that probably there has never been or never will be a period without worries. Long-term investors need to be both flexible and diversified. In our four timespan portfolio structure, I suggest that the Operational Portfolio (1-2 years) stay tactical and not take large losses. In the Replenishment Portfolio (2-5 years) one should develop both tactics that can tolerate at least one to two poor years. The Endowment portfolio (5-10+ years) should shift to a more strategic view to take advantage of periodic declines. The Legacy Portfolio, needed to feed multiple future generations, has a need to separate current fashionable thinking for expected future changes.

Portfolio Strategy For Someone Just Starting Out

Summary This article is meant for folks who are just starting out in stock investing. It focuses on how to make a beginner’s portfolio, which is well diversified, relatively safe, but at the same time offers flexibility, a learning curve and room for growth. There are other simpler and passive alternatives, like buying a few diversified ETFs, but if you like to invest in individual stocks, please read on. This article is not for everyone. I know a vast majority of Seeking Alpha readers are by and large mature investors, considering how often we see a healthy debate in the comments section. But then there are others who are just starting out and not sure how to approach investing. It could be someone fresh out of college who just started working, or someone in their early 30s (or even later) who never thought of investing until now. The first-time investor often does not know where to start. Should they invest all of their capital at once, or should they invest over time? How much do they really need to save to have a diversified portfolio and how many stocks should they invest in? Most folks, who are just starting out, will buy few random stocks based on some article or tip, without a plan. Once they have bought a few stocks, they have no long-term or exit strategy either. This article will focus on the importance of a strategy, even when you are starting out with a relatively small amount of capital and how to form a starter portfolio. Where to start: First things first. a) Determine how much money you want to invest: How much do you want to start with and how much you are going to contribute on going-forward basis? I always prefer a staggered approach to investing. – Initial Capital – Monthly contribution b) Determine your risk profile: It will depend on your age, type of job/ employment you are in, your emergency funds situation and most importantly, your risk-tolerance (% of investment capital you can afford to lose in a worst case scenario). Based on all these factors, put yourself into one of these categories – High-risk, above-average risk, moderate risk, low-risk or extreme conservative. For the last category, though, investing in individual stocks is not advised. c) Decide on a brokerage company: There are several to choose from in terms of deposit requirements, features, trading commissions and fees. Some examples are Fidelity, TD Ameritrade, E*Trade, TradeKing, Interactive Brokers, Scottrade etc. If your account size is small (less than $10,000), you would probably be better off with an ultra-low commission broker like Interactive Brokers. d) What kind of account you would want to open: This depends on your overall goals and factors like, how long can you afford to keep this money locked in? The account-types can be a simple individual taxable brokerage account, or a retirement type account like an IRA or Roth-IRA. The IRA or Roth-IRA accounts come with certain restrictions like yearly contribution limits and income limits. Also, there are restrictions as to when and under what circumstances you can withdraw from an IRA account without penalty prior to the age of 59½. Most brokerage firms list them when you attempt to open an account. Be sure you are aware of them or read them carefully. e) Write your investment goals: Yes, write them. You can choose whichever medium you would like, paper or electronic. But please, write your short-term and long-term goals for the investment portfolio you are about to start. If you are still with me, let’s begin: We will assume that you are starting out with at least $5000 (or more) and then will add some money every month to bring your first year total investment capital to $10,000. Divide your money in four buckets of 25% each. – We will call the first bucket as “Core.” – The 2nd bucket will be “Income” bucket. – The 3rd will be “Growth.” – Lastly the 4th bucket will simply be called “Cash.” This will be the money sitting in cash most of the time. 1. “CORE” Bucket: Depending upon the size of your bucket, this money should be invested in “Dividend Champions” or “Dividend Aristocrats.” The best place to start is the list called Dividend Champions maintained by SA contributor “David Fish.” This list consists of over 100 well known companies who have paid and increased dividends for at least 25 years. Some well known examples are Coca-Cola (NYSE: KO ), ExxonMobil (NYSE: XOM ), Johnson & Johnson (NYSE: JNJ ), Procter & Gamble (NYSE: PG ) etc. You could also look at the Dividend Aristocrats that are S&P500 constituents and have paid growing dividends for 25 consecutive years. If your investment money in this bucket is only $2,500, you could still buy 4 or 5 individual stocks ($500 or $600 each), provided your trading commission is minimal (say $1 per trade). If your brokerage charges $5 or more, you will be restricted to fewer companies to keep your trading costs low. 2. Income Bucket: Why income? Some might argue, “Why should someone who is just starting out care for income from the investment portfolio?” There are a couple of important reasons why I am suggesting this. First, this will allow us to diversify into alternative assets like REITs, MLPs, Bonds and Munis etc., which typically offer higher yields than the ordinary stocks, including the dividend paying stocks like JNJ, KO, PG etc. Second, the income stream can either be reinvested in the same securities to compound or accumulated to invest into new stocks. Thirdly, it adds more stability (less volatility) to the portfolio. Lastly, let’s face it – everyone likes income; it simply adds to the motivation. Below are just some examples for further research. These are not recommendations, but just a place to start your own research. REITs (Real Estate Investment Trust): Realty Income (NYSE: O ), HCP, Inc. (NYSE: HCP ), Cohen & Steers Total Return Reality (NYSE: RFI ) MLPs: Kayne Anderson MLP Investment (NYSE: KYN ), Duff & Phelps Select Energy MLP fund (NYSE: DSE ) One can choose individual MLPs, but one should be aware of the tax implications. Bond/Utility/Munis/ Preferred funds: PIMCO Dynamic Credit (NYSE: PCI ), PIMCO Dynamic Income (NYSE: PDI ), Nuveen Muni High Inc (NYSEMKT: NMZ ), Cohen & Steers Infrastructure (NYSE: UTF ), iShares US Preferred Stock (NYSEARCA: PFF ) High Yield Div Stocks: AT&T (NYSE: T ) Verizon (NYSE: VZ ) It may be best to choose one name from each of the categories above. 3. Growth Bucket: This is your money to invest in “growth,” or even somewhat speculative names, based on your individual experience, age, comfort level and risk profile. Just make sure your position sizes are small. For example, if the bucket size was $2500, do not invest more than $500 in any one stock. Basically, this is the money you can use to develop your learning curve. This is not the “buy and hold” bucket, so don’t be afraid to trade a little more frequently. Don’t be shy to sell when you can realize substantial profits. However, before you invest, always keep in mind your risk-profile, small position-sizing and due diligence. Below is one rather relatively safe strategy that you can deploy in a Bull Market. However, this will not work very well in a prolonged downturn. This is also called “momentum” trading. Every 4 to 6 months, pick the 3 most favored sectors (ETFs) of the market during the previous 3 months, and invest equal amounts in each of them. Repeat the process every 3 to 6 months. For example, in the last 3 months, the most favored sectors have been Consumer Staples, Healthcare and Technology. 4. CASH Bucket: This is your 25% cash position. In practical terms, this will vary between 15 to 20% of the total portfolio. Ideally, in a late Bull Market like we have today, this bucket should be overflowing, whereas in a downturn it can be used selectively to make good use of the opportunities that the market may offer (this means loaning money to other 3 buckets). As soon as it falls below 10-15%, a conscious effort should be made to bring it back to 20-25% level by way of diverting dividends/income or by adding fresh money. Now let’s see how well this portfolio will fare based on certain parameters: Safety: Investing can never be risk-free. However, we can manage the risk, by diversifying into different type of assets. Our (above) portfolio will have almost 50% of the capital in Cash and Core stocks. Another 25% is in alternative assets to some degree. This will provide the relative safety and low volatility during a down market. Growth: For anyone who is just starting out, “growth” is very important. Some would argue that for early stage investing (especially younger folks), 90-100% of the money should be invested in growth stocks. Theoretically this may be true, but it is easier said than done. Most folks do not have tolerance for high volatility and large drawdowns (the kind we saw in 2008) and they often end up exiting the market at just the wrong time. In contrast, this portfolio strategy is focused on investing discipline and asset diversification. The 25% cash position will provide the confidence to face any serious downturn, as it will provide opportunities to buy good companies at discounted prices. In addition, the CORE bucket should provide significant growth over a long period of time, assuming the dividends are re-invested. The 25% growth-bucket will provide better growth with time as the investor gets over the learning curve and becomes more experienced. Risks: The first risk is of course the market risk, which is true with any investment. Secondly, if you happen to invest at the tail end of the Bull Market, you are likely to face some headwinds. But one can only know this in hindsight. One way to mitigate this risk is to stagger your investments over a period of time. If you plan to contribute a regular amount on a monthly basis, this will automatically stagger your purchases. The third risk is that this portfolio is likely to underperform in a raging Bull Market (like we saw in 1990s or even in 2013), but at the same time, this will outperform in a down or sideways market. Concluding Remarks: For some, this strategy may look a little complicated for a small portfolio. However if your plan is long term and you would like to grow this into a large portfolio with regular contributions and portfolio growth, I believe this is the right approach. There are, of course, simpler and passive alternatives like buying a few diversified ETFs and these would be perfectly fine for someone who has no time or interest to study and research individual stocks. However, if you want to be an active investor, you need to have a strategy. I believe any strategy is better than none at all, since investing based on a well-defined strategy forces the investor to be more disciplined. The strategy outlined above is not perfect or complete by any means. Over time, as you develop your skills, you can make improvements and make it perform better to suit your individual temperament and needs. Full Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy.