Rules, Goal and Performance

 "Stocks do well or poorly in the future because the businesses behind them do well or poorly - nothing more, and nothing less."

Summary

Rule 1: Money, Mind management (10-15% per stock/sector, always has opportunity fund)
Rule 2: Contrarian approach (buy on fear, sell on greed)
Rule 3: FA screen (cheap valuation, little or low debt or net cash, good growth and profitability, increasing FCF with at least 5% consistent dividend with low dividend payout ratio)
Rule 4: TA screen (MCAD histo divergence, buy at support sell at resistance, volume-price movement, see at least 2 time frames)

 Lessons Learnt

1. Not more than 15% per stock
2. Do not average down, unless it is fundamentally strong stock and thus is average in
3. Have a long term horizon in investing since the companies chosen should grow and develop. Hence your total return would increase over the years 
   

Elaboration

1. Contrarian Approach
   Buy at point of extreme pessimism (Market Bottom), sell at point of extreme optimism(Market Top). Buy on fear, sell on greed. Buy low, sell high. Detect from PE ratio, market sentiments, news, articles, newspapers, people's conversation on street, magazine cover indicator, overpricd IPOs etc
2. Fundamental and Value Analysis
   ONLY buy fundamentally strong stocks with long term durable competitive advantage (at least 5 years of good history) + good balance sheets at discount price and/or with at least decent 5% CONSISTENT dividend even during recession

• Cheap Valuation - P/B, P/E, discount to NAV etc
• Business Economic Moats - high barrier to entry, unique product(s) or service(s) such that the company will always be needed and still be around for decades
• Growth - sustainable consistent growth
• Profitability -  ROE, ROA, increasing FCF NOT net profit only, net profit margin
• Financial Health (net cash or little debt, unless company got high earning powers to offset)- see gearing, debt to equity, quick/current ratio, interest coverage ratio
• Dividend - 2-3% p.a. with <40% dividend payout ratio. History of increasing dividend payout ratio over the years as business grow
• Risks - think of negative aspects of business
• Management assessment - compensation(executive pay is linked to company performances), character, experience

3. Technical Analysis
   Trend (up, down, sideway) see EMA, ADX, chart pattern, trend line
   Price vs momentum divergence (Volume, MCAD, stochastic, RSI, Money Flow, OBV, momentum, force index etc) - See many time frames. MCAD histogram divergence. 
   Support, resistance - Fibo, EMA, horizontal/slant trend line
   

Emotion management is important

You can never sell at the exact top or buy at the exact bottom - always buy and sell in stages.
(The top tick of a rally is the most expensive tick inthe market - fortunes have been lost hunting for it.)

Be patient. Never chase a stock. If you cannot get your price, walk away and wait again.

Money Management

First priority: capital preservation -> Steady rate of return -> High returns

50 % cash : 50% stock (or 40% : 60%) Never put entire networth in market. Always make sure that you got spare investment cash to buy when good opportunity arrive

Diversification into many stocks but not over diversify - look at whole portfolio instead of single stock for performance (Black swan event may happen anytime.) - aim 10% to 15% per stock max.

Do not average down lousy stock with no consistent durable advantage.

When to sell? (else let winners run)

want to put money in pocket

make mistake to buy it in the first place

need money to make an investment on an even better company at better price

when the company seems like it is losing its durable competitive advantage or fundamental deteriorated

during bull market where they is frantic buying such that the current selling price of the company far exceed the economic realities of the company, PE ratio too high
Indicators may flash warnings that momentum or demand has diminished

Investing Goal

Build up sufficient capital in order to generate sufficient passive/portfolio income through, investing, rental or dividends such that passive income > expenses.

Aim to has at least around $3000 passive per month-> Capital of at least 400 to 500k 

Current Achievement

Getting better.

Only started to understand a little more on FA and TA and came up the above rules in recent months only. was just blindly following buy call from analysts in the past since Sept 2009 till early 2011 with no TA and FA and always sell in fear instead of buy in fear. 

Reits
Good current price discount to NAV
Low Gearing with good cash flow
High Yield - 8% and above
Consistent dividend with minimal right issues even at recession
Strong sponsor
yield acretive acquistion with value creation