Untitled

20 Golden Rules


Do not pay more than 1% commission for buying and selling and do not pay any depot charge. Also ensure that the account is insured by a compensation fund. Shares are fact and emotion and emotions cause bigger movements. Rises and falls are usually overdone and often end with a crescendo of high volume. The following three “Cs” are most important and diversify between them: COUNTRY CURRENCY COMPANY A rule of thumb for valuing a share is as follows: If for instance the corner shop makes a profit of 70.000 EUR per year, you would probably be prepared to pay 300.000 EUR for it, i.e. five times annual profits which is a price earnings ration of 5. This KGV or P/E ratio is the single most important way to value a company or share. Many people buy shares because they like the company. Shares should be bought for increasing earnings which later reflect in higher share prices. Many Mercedes owners in the last years bought Daimler Chrysler shares and now the company has declared losses. Do not fall in love with a share. Take a loss and admit to yourself you were wrong. Be cynical and remember turnover is ego and profit is sense. Read and watch intelligent media. I suggest THE FINANCIAL TIMES DEUTSCHLAND or its international edition, the HERALD TRIBUNE (the Weekend Finance Section) and BOERSE-ONLINE. On TV watch CNBC for the US and Bloomberg Germany as well as N24 for German Markets. Do not normally have more than 10% of your portfolio in any one company, or more than 25% in any one industry, or more than 50% in any one country and 10 to 15% in a Money Market Fond (for example: 50% US$, 50% is fine). At 5% interest compound it takes 14,5 years to double your money. Interest rates up, both bonds and shares fall! Interest down, bonds and shares rise! Do not pay more than “10" above the foreseen earnings rise per share, i.e. if earnings are to rise by 20 % do not buy at a Price Earning ratio above “30". Be tax efficient! Off-set losses against gains. Defer taking gains until next tax year. If a holding rises 100 %, automatically half it. Conversely, if a holding falls 50 %, consider selling or US$ “cost averaging”. Select the right company and broker for your needs. Do not be afraid to use two brokers, one for internet and one to speak to. Consider having a broker in another country. Only buy funds if: you have less than 70.000 EUR to invest if the industry or geographic area are high risk, i.e. Biotech, Internet and Emerging Economies. Do not be afraid to have up to 15 % of your portfolio in high risk shares. Do use warrants or options to profit from excessive falls or rises as a way to insure the list. Do not normally buy shares in a loss making company, unless it will make profits within 2 years, and do not buy shares with a P/E (KVG) above “80". Be consistent with your investment practice. “Changing horses” half-way does not work. We never know when we die, so make sure in your "last will" that the correct people inherit the money and know how to handle it.

Do not pay more than 1% commission for buying and selling and do not pay any depot charge. Also ensure that the account is insured by a compensation fund.
Shares are fact and emotion and emotions cause bigger movements.
Rises and falls are usually overdone and often end with a crescendo of high volume.
The following three “Cs” are most important and diversify between them:

            COUNTRY
            CURRENCY
            COMPANY

A rule of thumb for valuing a share is as follows: If for instance the corner shop makes a profit of 70.000 EUR per year, you would probably be prepared to pay 300.000 EUR for it, i.e. five times annual profits which is a price earnings ration of 5. This KGV or P/E ratio is the single most important way to value a company or share.
Many people buy shares because they like the company. Shares should be bought for increasing earnings which later reflect in higher share prices. Many Mercedes owners in the last years bought Daimler Chrysler shares and now the company has declared losses. Do not fall in love with a share. Take a loss and admit to yourself you were wrong. Be cynical and remember turnover is ego and profit is sense.
Read and watch intelligent media. I suggest THE FINANCIAL TIMES DEUTSCHLAND or its international edition, the HERALD TRIBUNE (the Weekend Finance Section) and BOERSE-ONLINE. On TV watch CNBC for the US and Bloomberg Germany as well as N24 for German Markets.
Do not normally have more than 10% of your portfolio in any one company, or more than 25% in any one industry, or more than 50% in any one country and 10 to 15% in a Money Market Fond (for example: 50% US$, 50% is fine).
At 5% interest compound it takes 14,5 years to double your money.
Interest rates up, both bonds and shares fall! Interest down, bonds and shares rise!
Do not pay more than “10" above the foreseen earnings rise per share, i.e. if earnings are to rise by 20 % do not buy at a Price Earning ratio above “30".
Be tax efficient! Off-set losses against gains. Defer taking gains until next tax year.
If a holding rises 100 %, automatically half it. Conversely, if a holding falls 50 %, consider selling or US$ “cost averaging”.
Select the right company and broker for your needs. Do not be afraid to use two brokers, one for internet and one to speak to. Consider having a broker in another country.
Only buy funds if:
you have less than 70.000 EUR to invest if the industry or geographic area are high risk, i.e. Biotech, Internet and Emerging Economies.
Do not be afraid to have up to 15 % of your portfolio in high risk shares.
Do use warrants or options to profit from excessive falls or rises as a way to insure the list.
Do not normally buy shares in a loss making company, unless it will make profits within 2 years, and do not buy shares with a P/E (KVG) above “80".
Be consistent with your investment practice. “Changing horses” half-way does not work.
We never know when we die, so make sure in your "last will" that the correct people inherit the money and know how to handle it.