Trader

Well, it’s starting to happen…

Yup, I am getting some reaction from you. Well, maybe not you personally, but from quite a few “Independent Value Investor” readers.

Look, I’ve made a lot of money following these same investment strategies, and it has made me a far more confident investor.

I’ve looked for the right companies…

I’ve bought them at the right prices…

I’ve done my homework…

I’ve been disciplined (of course, I’ve told you about the times I wasn’t disciplined and how I’ve lost a lot of money as a result…)

And I’ve sold them at the right prices…

And most important of all, I’m still following these strategies and still making money…

But what I REALLY want to do is to let as many people know how they can do the very same thing.

While I’ve listed them as “secrets”, they’re really not secrets at all…

But how you implement these secrets is a bit tougher…

And that’s why I want to share everything that I know - to help people ACTUALLY become better investors.

ASIDE - if you want to know everything that I know about ‘independent value investing’ I’ve written it all down in my eBook “Multiply Your Money: What Every Investor Should Know About How To Be Successful In The Stock Market”.

Just follow this link and download your copy NOW:

http://www.independentvalueinvestor. com/MultiplyYourMoney.html

Now, being up front with you, this isn’t the fastest way to get rich… it requires some patience. And you actually have to do some work. But it has worked great for me, and I’m not switching strategies anytime soon.

Well there… I did it! In the last issue, I told you the “secrets”, you might as well unsubscribe now.

Are you still with me? Fantastic.

Let’s get to some real meat…

In the last issue I gave my five secrets towards being a successful value investor. Those five secrets are:

1. Find The Right Company 2. Buy At The Right Price 3. Do Your Homework 4. Be Disciplined 5. Sell At The Right Price

Now let’s take a closer look at them…

1. Find The Right Company -

Not all companies are worth investing in. Period.

Just because there are nearly 8000 companies listed on the NASDAQ, NYSE, and AMEX stock exchanges doesn’t mean they are all worth investing in.

You might be able to make money in them — I mean, if you COULD buy at the lows and sell at the highs, then you’d make money, right?

Well, while true, there’s a lot of risk investing this way (if you could even call it “investing” — it’s really more like gambling…)

It’s not a plan that you can rely on…

See, your goal as an investor is:

1) To have your investments increase in value, and 2) To protect investments from losing value

The best way to do this is to invest in the right companies.

The right companies will give you the greatest opportunities to increase your investment while limiting your downside risk.

And it’s not hard to find these companies — in fact, all the information you need is freely available.

So figuring this out isn’t that hard - and I will show you how to do it.

2. Buy At The Right Price -

So, what does this mean? Is $4 a good price, or is $100 a good price to buy stock?

Well, depending on the company, $4 may be far too expensive a price to pay, while for another company, $100 per share may be an absolute bargain.

This is why you need to know the company that you’re investing in (of course, this is secret #1).

Next, you need to compare the current stock price to what the actual value of the company is.

If the price is lower (in fact, significantly lower) than the company’s value, then it might be worth buying.

If the price is higher, then be careful!! You’re putting your investment at risk!

Make sense? Well, if not, let’s see if this example helps…

Let’s say someone was selling dollars (yes, dollars!)

Well, we know how much a dollar is worth, right? (in case, you think it’s a trick question, it’s not. A dollar is really worth $1).

Now let’s say that there was someone selling dollars for 50 cents. Would you buy some?

I’d say “yes”, and the reason is obvious — I can buy something for 50 cents that’s really worth $1.

So, if you know how much something is worth…

AND, you can buy that something at a discount…

Then you’ve learned the second secret in value investing - Buying At The Right Price.

3. Do Your Homework -

Once you found the company you want to invest in, and you’ve bought that company at the right price, you need to do your homework.

So, what does this mean? It really means that you need to stay on top of your investment — not how much it’s worth, but whether it’s the same company you invested in in the first place.

You don’t want to buy the stock and just let it sit without keeping tabs on it.

Some people talk about “buy and hold” as value investing.

But Jim Cramer (former hedge fund manager and TV personality), while he’s no value investor, has some good advice about investing.

Instead of “buy and hold”, you should think of it as “buy and homework”.

Doing your homework means making sure that all the things that led you to invest in this company are the same as time goes on.

For example, a company could have a really bad quarter and report results that indicates that business isn’t nearly as good as it was when you bought the company.

Or, a company could be healthy when you invested in it, but new management might take this solid company, borrow against its assets, and spend wildly into new markets that the company has no history in.

This will really have a negative effect on the company’s value, and most likely the stock price. If this is the case, you’d probably be wise to rethink your position in this company.

But you won’t know to re-evaluate unless you Do Your Homework.

4. Be Disciplined -

We talked in a previous e-mail about the fact that you need to be disciplined.

And I opened myself up to describing my “emotional period” where I lost a lot of money because I didn’t stick with what I knew…

And didn’t maintain my discipline.

The thing about investing in the stock market is that it can be REALLY stressful and gut-wrenching if you don’t know what you’re doing, and don’t know what to expect.

You sit there and watch this great company you bought, that you are SURE should be worth twice what you paid for it…

And it goes DOWN day after day…

You second guess yourself (I know because that’s what I did…)

But it takes discipline to know that this stuff happens…

And you can’t SELL just because your emotions are in it.

In fact, if you looked at the very same company going down in price as a POTENTIAL buyer instead of a current owner, wouldn’t you be excited about the possibility of buying this company at a great discount?

I sometimes get EXCITED when companies that I own go down, because that means that I can buy EVEN more at an even BETTER PRICE.

This is where the discipline comes in, and I’ll take you through steps to help you in giving yourself that discipline you need to be successful…

5. Sell At The Right Price

Great companies are great because they continue to do their business really well, so their value goes up, which means their stock price goes up.

And so does your investment.

But, things can change and it might be worth selling to take your investment and position it elsewhere.

So, when do you know when to sell?

Well, it’s the opposite of buying at the right price.

If the current price has gone up so much that it’s now more than the company’s value (sometimes, significantly more), then your investments are at a much greater risk of going down…

So you should probably consider selling.

Again, if you know your companies, and continue to do your homework, you’ll be able to tell when the price has gotten too high.

OK, that about wraps up this issue. Thanks for sticking with me through a rather lengthy newsletter.

In our next issue I’ll reveal my secret motivations for publishing the “Independent Value Investor”, and I will tell you what I am planning to get out of it.

And of course, we are going to move this saga along… and start to really dig into value investing - we need to cover how to evaluate companies.

If you want to know all of the ins and outs of evaluating companies and knowing when the right time to buy them is (and all of my secrets to success in this area then go and read THIS:

http://www.independentvalueinvestor .com/MultiplyYourMoney.html

Finally, please tell me what you think of the “Independent Value Investor” newsletter. Is it too long? Too short? Am I sending them to you too often? Not frequently enough? Do you think I am a complete scammer? Should I tell you about my background in space physics?

Take care, Mic

P.S. You can forward this newsletter to your friends… and they can get their own copy at http://www.IndependentValueInvestor.com.

P.P.S. I get lots of questions about recommendations. I have a list of some of my favorite resources at this page: http://www.IndependentValueInvestor.com/resources. html

CF Media, 3217 Peppermint Street, Thousand Oaks, CA 91320, USA