Click on the plus buttons at the left to open up each of my rules
1 Buy only carefully selected growth shares
Finding high-quality growth stocks is what I have been doing for 50 years. It is what I am good at doing and the great news is that thanks to globalisation and accelerating technological change there are more great growth stocks out there than ever in history. The QL Live Portfolio table – my core resource for top quality growth stocks has over 400 names with more being added almost daily. It’s a phenomenally exciting time for growth share investors.
The future is unpredictable so no one stock can ever be a sure-fire winner but spread your risk over 50 such carefully chosen holdings and you are going to have enough winners to do well, probably very well, maybe incredibly well.
3 Invest on a long--term perspective
Super-investor, Warren Buffett, the world’s second richest man, says investors who don’t plan to hold a stock for at least 10 years should not buy at all. I agree. Think long-term and life becomes so much easier. The short-term volatility of stock markets ceases to be a factor. The only thing that matters is that the company whose shares you bought delivers the growth, which made you buy the shares in the first place.
4 Charts & fundamentals
This one may be more for me than for you. I always look at both charts (the historic price action) and fundamentals (profit and loss, balance sheets and the like) in choosing stocks and deciding when to buy more and also for my occasional decisions to sell.
5 Adding to your holdings on buy signals to build scale in your portfolio
This is my ultimate magic bullet. It stops you selling too soon, which is the single biggest mistake made by most investors, including ones who are very experienced. Better still it builds your positions in your best performers and scales your portfolio over time in a way, which is simply astounding.
6 Using pound cost averaging to bring down your average cost of purchase
This is a technique made popular in the unit trust industry, where regular investment meant that more units were bought, when prices were low bringing down the overall cost of purchase. The QV System applies the same strategy to individual shares both through regular equal-amount purchases of new recommendations and doing the same with follow-up buys.
7 Using leverage to give you the resources to fund building your portfolio
Leverage is another magic bullet, the third of the 4 ‘B’s. It doubles, trebles, even quadruples your available resources and means that for a relatively modest input of funds on your part you can build and scale a diversified growth stock portfolio. Think of it as exactly like buying a house on a mortgage. A first class equity portfolio is every bit as good security for a loan as a house, better even, because it is so much more liquid and you build up your portfolio and borrowings slowly, not all in one go as you do with a house.
8 Managing your level of risk
If you are using borrowings to buy anything it is important not to go mad. My rule is that, except in the very early days, the value of your portfolio should never be more than three times your equity. Stick to that rule and ideally keep some firepower in reserve as well and you will be able to weather the inevitable stock market storms.
9 Turn setbacks into opportunities
Stock markets are like tigers. They need to crouch in order to spring. Market setbacks are always opportunities to buy high quality shares because prices always rebound. You need to make sure you always have something in the tank so you can be a buyer as share prices rebound and not be forced to be a seller, when prices slide.
10 No discretion means no greed or fear
Too many investors trade on their emotions, buying, when they feel greedy and selling, when they feel fearful. The Quentinvest system is entirely rules based so there is no room for greed or fear, no agonizing over what to do or whether to buy or sell.
11 Patience is key
Rome wasn’t built in a day and building a great growth share portfolio doesn’t happen overnight. Markets are volatile, businesses need years in which to invest and grow so you need to give them that time. Remember Buffett’s 10-year rule. Funnily enough though it is just those sensible investors, who don’t expect overnight miracles, who often get them.
12 Error--free discipline
Just like generals planning to win key battles you cannot afford to make mistakes. That doesn’t mean never buying a dud investment; even Buffett does that sometimes. Error-free investing means never making avoidable mistakes, which in the Quentinvest world means following the rules, all the time.