A 3-part strategy for successful investing

Many investors start out thinking that the way to make money in the stock market is to “buy low and sell high”. This, though, is hard to do. You can only spot a ‘low’ or a ‘high’ in hindsight. No one succeeds at it routinely. But you can make a big improvement in your investment results by following these three simple rules, which are the core of my approach to investing.

1. Invest mainly in established companies

These companies have a proven business concept, and a history of earnings if not dividends that stretches back through one or more recessions or economic downturns. When the economy goes into a lengthy downturn, established stocks inevitably hold up better than average, and recover quicker than the average stock. In contrast, the most vulnerable companies in a downturn are those that were losing money or only marginally profitable, even when times were good. (more)