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Top Ten Tips for a Winning Year

How to turn 2005 into the year you make it big in the sharemarket

(This article appeared in The Daily Telegraph, January 6, 2005)

By John Price, PhD

If you really want to make money on the sharemarket in 2005, follow Warren Buffett's lead and stick to some simple rules.

John Price is CEO of Conscious Investing, a firm which provides investing sogtware for people who want to trade like invdestor whizz Warren Buffett. Price says successful investing needn't be complicated if yiou stick to what you know.

These are his tips for 2005.

1. Think of stocks as businesses
What do they do? Do you use their products or services? Who are their competitors? Consider Woolworths or Coles Myer. Or the ANZ or the Commonwealth Bank.

2. Invest in what you know
Do you shop at Harvey Norman? Do you think you get good value? If you think that, then thousands of others probably think the same thing.

3. Let your investments do the work for you
Take your time to find stocks that meet your requirements—but then be prepared to stay with them. On average the more that people trade the worse they do.

4. Don’t sell without deciding what to do with the money
Most people sell just because the price goes up. Then they start looking around what to do with their money. On average they end up investing in stocks that underperform the ones that they sold. Only sell when you are confident that you can do substantially better with your money somewhere else.

5. Look for companies that are using their money well
When you invest you want to be able to make money on your money. It is the same with businesses. The money they have is called equity. Look for companies that are making at least 10%, and preferably 15%, on their equity.

6. Stay away from “glitter” stocks
You pay inflated prices to keep up with fashion trends. It is the same in the stock market. Is a stock is continually featured on the news or in the magazines? It is probably a result of its PR department working overtime rather than the quality of the business. Think One-Tel and HIH.

7. Be ready
Start by putting away a fixed amount each pay check. It doesn’t matter how much it is. The important thing is that it is regular. Don’t worry that you are only getting a few percent interest on it. Eventually you will find great opportunities that will make up for the initial low interest many times over.

8. Take your time
When you see a company that interests you, don’t rush in. Prices generally move by over 50% per year. So set a target price and wait for an opportunity. If you are the impatient type and don’t think that you will be able to wait, invest a small amount of money first.

9. Keep a record of why you bought or sold a stock
We like to take credit for things that go right and blame others when there are losses. “It wasn’t my fault. The market went down.” By keeping a record you will be preparing yourself for investing larger and larger amounts of money.

10. Enjoy your investing
If investing in the stockmarket is stressful, then you are probably going to miss seeing good opportunities. And if it is very stressful, you may not even live long enough to get the benefit of your investing.

Special thoughts for 2005
Don’t get too complicated. Pick four or five consumer companies or retail stores such as Coles Myer, Woolworths or Foodland or David Jones. Get an understanding of what they do and who their markets are. If you like any of them, look for a good target price to start buying them.

When you have done that move on to another sector. For example, in the financial sector have a look at ANZ or Perpetual Trustees.

John Price is CEO of Conscious Investing. Email:


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