There are many how give investment advice and generally it takes a number of years to beware of the flows of the market before you can give advice. Scott Barlow (sbarlow@globeandmail.com) wrote a column about the best investment advice I ever heard and offers it in a column. Michael Mauboussin is the managing director of Global Financial Strategies at Credit Suisse and has been in the industry for over 30 years. You can see a you tube view of him talking about luck and skill.  Mr. Barlow recommends his Decision Making for Investors report and he recently wrote Reflections on 10 Attributes of Great Investors.  The 10 are:

be numerate ( try to understand accounting)

understand value – the present value of free cash flow

properly assess how a business makes money

compare effectively – expectations versus fundamentals

think probabilistically –  the expectation of winning and losing on a trade

update your views effectively

beware of behavioral biases

know the difference between information and influence

how to size investment positions

read – keep an open mind

There is little in the above that all can not do.

In his article Mr. Barlow focused on think probabilistically – the frequency of being correct does not matter, what matters is how much money you make when you are right and how much you lose when you are wrong.

You have to do your homework to determine what you can make, what you downside is and how to limit your downside if you are wrong or the market does not react to the way you think it should.

Linking to dividend paying stocks, the concepts are simple however there is complexity throughout the layers which makes investing more difficult. Part of the reason is we are people, have demands on us and never have perfect information. Much of investing is trying not to lose money and one of the best methods not to lose is having patience in your approach. If you invest in profit making companies, the upside unless the market is near a bottom may not be 5 times, but if you receive a number of years of returns with limited losses you might be better off in the long run.

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