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What you can learn from over 100 years of investing wisdom

by , 19 December 2013

“The man who begins to speculate in stocks with the intention of making a fortune usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes gets rich.” Charles Dow said this back in 1901. Over 100 years ago, Charles Dow wrote about how to make money in the stock market in his publication: The Wall Street Journal. Amazingly, the same rules for making money that he outlined then apply today. Read on to find out how you can apply them to your investing…

Even after over a century, Charles Dow’s lessons are still very apt, Steve Sjuggerud in Investment U explains…

Timeless investing lessons from Charles Dow

Lesson number 1:
“The public, as a whole, buys at the wrong time and sells at the wrong time. The average operator, when he sees two or three points profit, takes it. But, if a stock goes against him two or three points, he holds on waiting for the price to recover. This then sees a loss of two or three points run into a loss of ten points.”

Lesson number 2:
“The [best] rule is to cut losses short, but let profits run. It sounds very easy to follow, but is in reality difficult to observe. The difficulty arises from the unwillingness of an operator to take a small loss when experience shows him that in many cases such a loss need not have been taken.”

Lesson number 3:
“There are two general methods of trading.

One is to deal in active stocks relying for protection upon stop orders. In this method of trading, it is not necessary to know much about the values. The operator guesses which way the stock will move. If he guesses right, he lets his profits run. If he guesses wrong, he goes out on the stop order. If he can guess right as often as he can guess wrong, he is fairly sure of profits.

The other system is an entirely different proposition. It starts out with the assumption that the operator knows approximately the value of the stock. It assumes that he has considered the tendency of the general market; that he realises whether the stock is relatively up or down; and that he feels sure of its value for at least months to come.”

So there you have it: Timeless, classic investing rules from the master, Charles Dow.

What you can learn from over 100 years of investing wisdom
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