August 11, 2016

One of the greatest American investors and entrepreneurs of his time was William J. O’Neil born in 1933. He began his career after graduating from Harvard as a stock broker for Hayden, Stone & Company, and developed an investment strategy which made early use of computers in 1958. In 1984 he founded Investor’s Business Daily, a publication that provides information on stocks, mutual funds, commodities and other financial vehicles for individual investors and financial professionals. O’Neil had many pearls of wisdom to share, but we find these 7 principals to be of the most value.

• Valuation Doesn’t Matter: “The most successful stocks from 1880 to the present show that, contrary to most investors’ beliefs, P/E ratios were not a relevant factor in price movement and have very little to do with whether a stock should be bought or sold.”
• Diversification is Bad: “Broad diversification is plainly and simply a hedge for ignorance… The best results are usually achieved through concentration, by putting your eggs in a few baskets that you know well and watching them very carefully.”
• Buy High then Buy Higher: “[Buy more] only after the stock has risen from your purchase price, not after it has fallen below it.”
• Dollar-Cost Averaging a Mistake: “If you buy a stock at $40, then buy more at $30 and average out your cost at $35, you are following up your losers and throwing good money after bad. This amateur strategy can produce serious losses and weigh down your portfolio with a few big losers.”
• Technical Analysis Matters: “Learn to read charts and recognize proper bases and exact buy points. Use daily and weekly charts to materially improve your stock selection and timing.”
• Ignore TV & So-Called Experts: “Stop listening to and being influenced by friends, associates, and the continuous array of experts’ personal opinions on daily TV shows.”
• Stay Away from Dividends: “Most people should not buy common stocks for their dividends or income, yet many people do.”

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