IBD 20 Rules for Investment Success

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IBD 20 Rules for Investment Success

1- Consider buying stocks with each of the last three years’ earnings up 25%, return on equity of 17%, and recent earnings and sales accelerating.

2- Recent quarterly earnings and sales should be up 25%.

3- Avoid cheap stocks. Buy stocks selling for $15 to $100.

4. Learn how to use charts to see sound bases and exact buy points. Confine buys to these points as stocks break out on big volume increases.

5- Cut every loss when it is 8% below your cost! Make no exceptions!! So you will avoid possible huge, damaging losses. NEVER average down. 

6- Follow selling rules on when to sell and when to take a profit on the way up. Review “When to sell and Take a Profit”.  In“How to Make Money in Stocks”.

7- Buy when Market Indexes are in an Uptrend. Reduce investments and raise cash when general market indexes show five days of increased volume distribution

8- Read IBD “Investor Corner” and “Big Picture” columns to learn how to recognize important tops and bottoms in market indexes. 

9- Buy stocks with a composite rating of 90 or more and a Relative Price Strength of 85or higher in the IBD SmartSelect Corporate Ratings.

10- Pick companies with Management ownership of stock.

11) Buy stocks with a Composite Rating of 90 or more and a Relative Price Strength Rating of 85 or higher in the IBD SmartSelect Ratings.  Run a Checklist on the top stocks in the IBD 50.

12) Consider boldface stocks in IBD's New Highs List and Stocks On The Move.

13- Current quarterly after tax profit margins should be improving, near their peak and among the best in the stock’s industry.

14- Don’t buy because of dividends or P-E ratios. Read a story on the company, Buy the No 1 company in an industry in earnings and sales growth, ROE, profit margins and product quality.

15- Pick companies with a superior new product or service.

16- Invest mainly in entrepreneurial New America companies. Pay close attention to those with an IPO in the last eight years.

17- Check in to companies buying back 5% to 10% of their stock. And those with new management (what is management’s background?)

18- Don’t try to bottom guess or buy on the way down. NEVER argue with the market. Forget your pride and ego.

19- Find out if the market currently favors big cap or small cap stocks.

20- Do a post-analysis of all your buys and sells. Post on charts where you bought and sold. Evaluate and develop rules to correct your major mistakes. It’s what you learn after you think you know what you are doing that’s vital. That is how to improve your results.