In the Globe and Mail Report on Business, Thane Stenner who works at Richardson GMP wrote some easy lessons for all you us to remember about investing. Mr. Stenner highlighted writing by Howard Marks one of the co-founders of Oaktree Capital Management. Mr. Stenner recommends one of Mr. Marks books – The Most Important Thing: Uncommon Sense for the Thoughtful Investor. The recommendations are:

1. The No 1 job of any investor: Control Risk.

We all start investing with the idea of making more; the idea should be keep your capital safe or try not to lose it. There are many, many different  theories on which venue you should put your money in to make more. Most of them will end up with you having less, a few will give you more; remember the rule in investing is looking backwards is 100% right, looking forwards is an unknown. The rule means to do your homework, say no more than yes and have a good reason why to go forward.

2. Safety comes from buying things for less than they are worth.

If you go to a garage sale or flea market there are many items to be found, if you know what you are looking for in terms of prices you will be able to save money. The idea is you know what you are looking for and whether it is a good buy or not. The same theory applies on the stock markets, you have to study or know when something is trading for less than full value and the reasons why it will go up in value. The only good thing about a market fall is if you have cash or the ability to buy, you can pick up the best stocks at a lower price. When the market corrects itself, your assets are worth more.

3. The Market tends to move in Cycles and People forget, which means there are buying opportunities.

You have seen the charts where the sales or prices grow over time in a seemingly upward progression and everyone is happy, until there are dips. The world operates that way. There is a time to be in a sector, there is a time to seek alternatives.

4. Should does not mean will.

Very bright people will pitch you their ideas of what should happen on the markets, if they are correct the market should do what they are pitching. If they are not, you will incur more risks and wonder why the markets are not reacting to the should do. The reason is the very bright people will need to pitch you something else next week and every other week, rejecting theories or saying no will allow you to lose less or save your money. Build flexibility into your positions so you are not taking unnecessary risks.

5. The vast majority of your holdings should be consider 5 year holds.

If you have done your homework to buy undervalued assets, it will take time before the investments double in size. The idea is to buy stocks generally above $10 and typically more as the company and industry makes changes to be more profitable the stock will increase in value. Try to stay away from leverage and invest in the best quality you can.

Linking to dividend paying stocks, if you wish to lower the risk level even more add variables into your analysis such as the best dividend paying companies available. In this fashion as the market prices rise, you are benefiting from the dividend as well as the capital gains. The risk level is lowered and you are protecting the assets. All companies have highs and lows, as an investor you task is to study them and buy when the companies are beginning to come out of the down cycle and enjoy the ride upwards. At the same time begin to look for alternatives and follow the cycles.

There are more questions than answers, till the next time – to raising questions.