6 Practical Investing Tips from Louis Rukeyser
By: Source: AARP Bulletin Today Date Posted: 2003-06-30 16:25:30
• Diversify—by not putting all your eggs in one basket. But Rukeyser cautions against being spread too thin. He thinks if you hold individual stocks, 12 to 20 may be enough, and if you have mutual funds, they should include a mix of large and small companies.
• Invest in a business, not a stock. If you buy stock in a company with good products or services, a sound balance sheet and a proven record, he says, "then I wouldn't worry too much about the future." He adds, "I think people who throw out a stock because it has a bad quarter are nearly as dumb as [some] analysts."
• Buy and watch should replace buy and hold as a strategy. "You've got to monitor [your stock]; you can't just say, 'I'm going to buy it and forget it.' Companies that were great in the past generation won't necessarily be the leaders in the next."
• Be realistic. Too many people focus on how much they had on the peak day of the market, according to Rukeyser. He calls that "silly." "You can't say, 'I paid $30 for this stock, therefore it's worth $30,' when the market says it's worth $12. You've got to say, 'Is this the best place for me to have $12 right now?' "
• Bonds have their place. They belong in every balanced portfolio, he says, "particularly as people need income more as they age." But, he adds, "I don't think this is the time to initiate major new positions, certainly [not] in government bonds."
• Buy low and sell high is an ancient piece of advice he thinks is still relevant. But, he cautions, don't interpret that to mean "buy lowest, sell highest," adding, "Nobody in the history of the world has ever done that successfully."
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