Rules of Investing

Chapter 3 - Rules of Investing

Chapter 3, Rules of Investing, focuses on generic investment rules and life lessons. The chapter lists six rules, from simplifying things to ignoring noise to value analysis and more. Each investment rule has an extensive explanation with multiple subtopics.

If you have a million dollars and every dollar has a story to tell, then you truly earned that million dollars.

— Wise Sayings, Topic 3.2, Chapter 3

Progressive Value Investing advises investors to be very disciplined and show patience while investing for the long-term, and also stipulates simple investing rules. Investors should incorporate these rules while investing in a stock market.

Topics covered

  • 3.1Simplify Things
    • 3.1.1Four Golden Rules of value investing
  • 3.2Wise Sayings
    • 3.2.1Don't live beyond your means
    • 3.2.2Money doesn't grow on trees
    • 3.2.3Few can bring down an army
    • 3.2.4Money can't buy happiness
  • 3.3Ignore Noise
  • 3.4Long Term View
    • 3.4.1Extra Short Term
    • 3.4.2Short Term
    • 3.4.3Medium Term
    • 3.4.4Long Term
    • 3.4.5Extra Long Term
    • 3.4.6Invest and Forget
  • 3.5Value Analysis
    • 3.5.1Quarterly Results
    • 3.5.2Price Earnings Ratio
    • 3.5.3Dividend Yield
    • 3.5.4Annual report
  • 3.6Thumb Rule
    • 3.6.1Managing Risk
      • 3.6.1-1Buy More
      • 3.6.1-2Wait and Buy
      • 3.6.1-3Exit at Loss
    • 3.6.2Three Ten Rule
    • 3.6.3Cloning Investments

Summary

The chapter Rules of Investing focuses on the general investment rules and life lessons required for Progressive Value Investing. The chapter starts with Simplify Things topic by explaining why investors need to reduce complexity and follow simple steps while investing.

List of some old sayings that are relevant for Progressive Value Investing. The investors will learn why they need to filter out speculative market noises and invest with investors' data analysis. There is a classification of asset classes concerning holding type and holding period. Each holding type explains the risk, investment options available, advantages, and disadvantages over different asset classes.

The topic Value Analysis explains how long-term investors can use quarterly results, price-earnings ratio, dividend yield, and annual reports for analyzing a company's intrinsic value.

Investors should incorporate one or more thumb rules while managing investment risk. The Three Ten Rule (10-10-10) specifies the ultimate investment goal for the long-term investor.