Investor Trading

The following are intended to trace the purchase of common stocks by a relatively simple and realistic approach; at the same time, it must be remembered that hasty action without appropriate care will most certainly court future danger.

(A)    Determine a financial plan; there is no sense to an indiscriminate and hodgepodge ap-proach; the building of an estate is serious business and any action must be carefully planned.  The financial plan must include a necessary backlog for future emergencies; no investments should be made without such an emergency fund.
(B)    Be certain that you place a portion of your funds in fixed-income securities before attempting the purchase of equities. This is to minimize risk and is not to be considered lightly; always play safe, remembering that “a stitch in time saves nine” times as much worry!
(C)    Carefully pick the industry into which your funds are to be invested, having investigated (a) its past performance; (b) its future prospects; (c) its geographical aspects; (d) its labor relations; (e) its competitive position; (f) government relationships, both direct and indirect; (g) its relationships to the public by means of goods and/or services; (h) its over-all stability as to both sales and profits; (i) its past and immediate future as to earnings and dividends.
(D)    Make the selection of a stock within the industry. If it is a public utility, do not overlook the several important criteria noted in a previous section; if it is an industrial equity, then consider sales  trends,  consistent earnings, diversification in both products and location, aggressive and successful management, finances and financial structure, leadership in the field, and a record of steady growth and dividends policy; perhaps, in addition, it should be listed upon a recognized exchange in order to permit continuous check upon its progress. The foregoing factual material is usually available to the serious investor; in fact, most brokers will furnish such information upon request. By all means make a comparison of the candidate’s stock with others in the field, so that you may reaffirm your judgment or perhaps raise some doubts as to its soundness and reconsider your decision.