Step 10.Izuchite investment strategy Set Rules

Step 10.Izuchite investment strategy "Set Rules"

The method sets the rules is to buy quality companies and relies only on simple math, logic, common sense and your patience. This technique is a model of investment, convenient, like a mutual fund, but brings higher average market yield and requires lower costs ". - The Motley Fool's Rule Breakers, Rule Makers
Investment Philosophy "Set Rules" starts with the same conditions as all other investment philosophy that we recommend:
You are the bestmanagers for their money, and those "wise men" from Wall Street, trying to assure you that you lack the time or skill to manage your money, deeply wrong.
If you've made your selection is correct, then after a short time can own a portfolio of 8-15 giant companies that set the rules in our economy. By purchasing shares of these companies once, you can safely close your eyes and doze off investment for ten years, and then wake up and take great income.
Criteria for selecting the "Set Rules" begins with the search brand ї1 in the industry. And not just ї1 in the United States - we're talking about the king of world brands. What companies come to mind when you think about soda, razors, diamond rings or microprocessors? We suspect that most people would call Coca-Cola, Gillette, Tiffany, and Intel. In addition, for companies, "defining the rules," characterized by numerous repeat purchases during the year. Those citizens who are not stars, NBA, do not buy many cars a year, so the company is General Motors falls. (Of course, unless the NBA does not expand its membership to 6000 or 7000 teams. But even in this case, we do not believe that General Motors will be able to collect a large number of repeat customers every year.) Instead, think about those things that you often use in everyday life, either because they like you, either because they will need: soda, casual wear, pills for high blood pressure, shampoos. Think of Coca-Cola, Gap, Merck and Procter & Gamble.
In the calculation of financial indicators for possible companies, "sets the rules", you will need to check a few variables. Start with the historical results of operations of the company. If you decide to buy and hold for at least ten years, shares a very small number of companies, you will preferably be sure that these companies are rewarded generously of their respective owners in the past. Check the performance of your selected companies over the past ten years, and make sure that they are worthy of your attention. Click on the name of companies, so you can view the ten-year price charts Coca-Cola, Gap, and Pfizer.
Figures
For "Set Rules" typical rate of gross profit (gross profit divided by revenue) above 50% net profit margin (net profit divided by revenue) of at least 7% and sales volume, growing by more than 10% per year . Companies that meet these criteria include the drug manufacturer Schering-Plough (gross profit rate of about 80%), the manufacturer of devices for Internet infrastructure Cisco Systems (net profit margin of about 16%) and Gap (sales growth of over 16% per year .)
Cash - a head
These companies exist in the market for quite some time and all the while earning a lot of cash. Therefore, at this point they should have accumulated a considerable reserve of cash, through which they can develop their activities in the future, without the need to borrow money from someone else. You can find out how much fat wallet of the company by examining its balance sheet. One of the techniques of investing in "Set Rules" is to find companies with low turnover. This ratio indicates whether a company succeeds in effectively managing their cash flow, ie whether it can quickly collect payments from their customers (a sign of strength) and long pay its obligations.
Perhaps more important than the match of the above criteria, is its ability to move confidently in the right direction. Since the stock price will always be tied to how the market assesses the future prospects of the company, you will need to present it better than the past, and to improve growing faster every year. Look for companies with rising rates of return, the company repurchased its shares back, and companies with increasing cash flows. Think about $ 19 billion, currently lying in a bank account Microsoft. When compared with their competitors in the industry, a candidate "sets the rules" should be the clear leader in its class.
Investments in "Set Rules" are classified as long-term. The idea is that once you have chosen these companies and put them in your money, you should be able to leave their money invested in ten years or more. This means that you do not take ten years any decision on buying and selling and will not receive any capital gains, taxed to high taxes.
Using the services of a broker with a very low commission offering transactions at prices ranging from $ 7 to $ 10, you can get ten companies, "Set Rules", for a total fee of $ 100, starting your investment with the sum of $ 5,000 to $ 10,000. This would correspond to our problem: to keep the level of commission not exceeding 2% ($ 100 / $ 5000 = 2%).
We have given only the key principles of investment strategies "Set Rules", in fact, to successfully implement this strategy, you need to know much more (for example, she devoted half of the special books) (David and Tom Gardner, The Motley Fool's Rule Breakers, Rule Makers) . By showing you this tip of the iceberg, we wanted to give you an idea of ??the strategy that you might want to spend a little more of his time in the future. (And it's worth it, because the portfolio is built on the basis of a strategy of investing in "Set Rules", consistently exceeds the average.)
The strategy of investing in "Set Rules" is one of the rather conservative, as is to invest only in the recognized leaders. If you consider yourself to be among the more advanced and investors looking for riskier investments in hopes of higher profits, see "Step 11", where we describe a strategy of investment in "Companies that violate the rules."