The book breaks it down into four simple rules as follows:
- Purchase a minimum of ten different issues and a maximum of thirty (For those with less than $10,000 it is my opinion to purchase a diversified index fund. Reason being is the commissions will start eating away your profits.)
- The companies you select should be large, recognized, and conservatively financed.
- The companies you select should have a long record of continuous dividend payments (10 years or more).
- The investor should impose a limit on the price you will pay in relation to its average earning over a certain time frame (such as 7-10 years, the book suggests limiting your purchase to 25 times average earning and not more than 20 times those of the last twelve-month period.)
I hope this Stock Talk is helping you understand a little more about what all is involved in the world of investing. Again, my suggestion is to buy this book and read it. Why buy? Well, because I feel that this is a book that you will want to have in your library to pass down to your kids. The words of wisdom will not change unless we eventually change economics to something like what exists in Star Trek. I do not see that happening anytime soon...therefore you should get the book and start studying.