| Are you a good stock investor? | | | | in it. |
| This Stock Investing Scorecard will help you | | | | 12. I only purchase a stock when it is showing |
| understand what you do well, plus it will suggest | | | | strength. I want each of my investments to get off |
| areas where you might pay the most attention to | | | | to a good start. |
| improving your investment practices. | | | | 13. I always look for companies with the best |
| Score yourself from 0 (worst) to 5 (best) on each | | | | prospects for long-term earnings growth. I know that |
| of the following. Then check your total score at the | | | | over the long term, stock prices follow corporate |
| end to see where you stand. | | | | earnings. |
| 1. I believe that the market is rational over the long | | | | 14. I invest only in dominant companies. They have |
| term and rewards sensible, intelligent investing. I also | | | | competitive advantages that will enable them to |
| recognize that the market is essentially unpredictable | | | | sustain earnings growth. |
| over very short periods such as a day or a week. | | | | 15. I never trust management which has |
| 2. I always maintain a fiduciary duty to myself. I | | | | demonstrated a lack of integrity. |
| never forget Buffett's Rule #1: Don't lose money. | | | | 16. I have fun investing. I don't overextend myself, |
| 3. I know my investment goals and have clear | | | | and I never put money into companies that make or |
| strategies to reach them. I have written them out, | | | | do anything I don't admire. |
| and I review them at least once per year. I adjust or | | | | 17. I am wary of companies with excessive debt, |
| amend them when appropriate. | | | | because I know that it is as hard for them to handle |
| 4. I only invest in excellent companies with sound | | | | as it would be for me. The mere fact that other |
| business models that I understand. I must | | | | companies in the same industry also carry lots of |
| comprehend how a company makes money before I | | | | debt is no excuse, because I know that every |
| will invest in it. I will not fall for the next Enron. | | | | company chooses its capital structure. No solid |
| 5. I always determine a rational price for any stock. I | | | | company needs to be over its head in debt. |
| only buy at a fair or advantageous price. | | | | 18. Although I do not demand that a company pay |
| 6. I know that a 50% loss on a stock followed by a | | | | dividends, I do consider the regular payment and |
| 100% gain equals zero. Therefore, I am very careful | | | | raising of dividends to be a big plus factor. |
| to avoid a large loss on even a single stock. | | | | 19. I run my investments like a business. I am |
| 7. I manage my portfolio intelligently and consistently. | | | | dispassionate when making buy, hold, or sell decisions. |
| This does not mean that I trade a lot, but it does | | | | I never fall in love with a stock. If it is a loser, I let it |
| mean that I pay attention. I keep track of the | | | | go. I do not over-hold any stock just waiting (hoping) |
| results of each individual stock investment, and I | | | | for it to get back to even. |
| make strategic decisions about what to keep and | | | | 20. If I cannot find good investment opportunities, I |
| what to sell. My goal is to let my winners run and to | | | | am never afraid to have some of my ''stock money'' |
| sell my losers. | | | | in cash. I do not feel the need to be ''fully invested'' |
| 8. I know that any investment in the stock market | | | | at all times. |
| carries risk. I actively manage that risk. I am willing to | | | | How did you do? The maximum score is 100. If your |
| tolerate some short-term variability in my wealth in | | | | score is high, congratulations! You are following a |
| order to gain the long-term benefit of beating | | | | sound approach to investment success. |
| inflation through stocks. I am not willing to tolerate | | | | If your total score is below 80, that raises a serious |
| significant losses. | | | | question whether you should be investing in stocks |
| 9. Before making any move in the market, I do | | | | at all. The good news is that you can improve your |
| everything I can to stack the odds in my favor. I | | | | knowledge and practices in every area considered. |
| know that the best results come when I have an | | | | Focus on any low-scoring areas. If you gave yourself |
| edge. The edge can be better information, better | | | | 0, 1, or 2 on any question, that is definitely a red flag. |
| analysis, an advantageous price, better risk | | | | Concentrate on improving your practices in that area. |
| management, or a combination of all of them. | | | | My experience is that improving in any one area can |
| 10. I read, analyze, and do my own thinking. I am | | | | have a significant impact on your overall success in |
| always striving to improve my investment practices. I | | | | the stock market. |
| never buy a stock solely on a tip. | | | | Of course, the best investors are good across the |
| 11. Whenever I am interested in a company, I write | | | | board. That should be your ultimate goal. Investors |
| out its "story" in a few sentences. This includes the | | | | sometimes go wrong by skipping essential steps. |
| company's business model, its strategies, its | | | | They make "one-time" exceptions. Don't do that. |
| prospects for sustainable profits, and (especially) its | | | | Follow best practices, and adhere to your own |
| competitive advantages. If I can't understand the | | | | written strategies and tactics, all of the time. |
| company's business enough to do that, I don't invest | | | | |