PSI | Investments

INVESTMENT GUIDELINES

For sustainable success at the stock market an investor needs a strategy formed by the entirety of his investment guidelines. Always following the same criteria simply increases the probability of repeatable investment successes. On the other hand, lack of profits signalize the requirement of an strategy adjustment to make better decisions in the future. My investment strategy is manifested by the following basic principles.

Ⅰ. Calmness & Patience

The stock market is volatile. Ups and downs are normal and can also become quite extreme. Get used to it and do not panic. Keep in mind that your decisions are not only well-considered but also long-term oriented. If your investment horizon is of three to five years, short setbacks should not discourage you. But also do not be too enthusiastic about steep price gains. Thereby, it helps a lot to only use money which potentially loss would not put you into a major life crisis - physically or mentally.

Ⅱ. Standardized & Objective Evaluation

Every investor needs to decide which kind of data are important for the prediction of the prospective profitability of a stock. Is it an attractive price development in the past? An intact and well proven business model? A cheap price rating? Or a high growth potential? In any case it is essential to always use the same, self chosen and predefined criteria when comparing different stocks with each other. It guarantees a fair competition between the stocks while searching for an attractive investment. In addition, the more stocks are analyzed, the higher is the chance of finding a promising investment. So, a computer routine for evaluating stocks according to the self chosen criteria is very advantageous - like my CASPER.py!

Ⅲ. Sustainable & Understandable Business Model

A company analysis does not only include the rating of financial key figures but also a glance to the business model. It should be clear and easy to understand, so that you roughly know for which kind of business you provide your capital. On this basis, it is also possible to identify profit influencing parameters and to find logical arguments for or against an investment without taking hard financial numbers into account. Good business models are normally the ones which are sustainable. That means the company is most likely still profitable in future years, has products which experience a continuous increase in demand and it pursuits to use its resources efficient and considerate of nature. Of course, very promising are also companies with excellent reputation and for whose products people are willing to pay more as they consider the quality to be much higher than the one of other products.

Ⅳ. Diversified & Manageable Depot

The idea of diversification is to reduce the impact of single stocks, discrete countries or particular economical sectors on the portfolio performance. This can be achieved by holding a larger number of stocks from different regions and industries. Why is that important? If one stock, country or sector experience a dramatic price drop overnight a high number of remaining stocks can compensate the loss more easily. In my opinion approximately 20 different stocks from various sectors are enough for a satisfying diversification. More stocks only increase the effort for questioning the current depot positions regularly.

Ⅴ. Insider Purchases or Owner-Managed

Nobody knows better how a company faces arising challanges or opportunitues than members of its senior management level. If theses people buy a significant number of shares of their employer proves that they strongly believe in the company`s future success. Therefore, insider trades are always a reason to have a closer look at the company. If the company is even owner managed it is very beneficial for investors: For owner the position of the CEO is not only an ordinary job, but often a purpose of life.

Keep in mind that sometimes even good decisions will not pay out...