Today we are learning some strategies or techniques on how to deal with the share market and how to invest in the share market. Here, some legend investors share their knowledge & experience with us. These tips are more helpful for our trading/investing lifestyle. 

Jack Schwager

Jack Schwager (born 1948) is an American trader and author. His books include Market Wizards (1989), The New Market Wizards (1992), Stock Market Wizards (2001).

Schwager is an eminent industry expert and author of a number of critically acclaimed financial books, including The Market Wizards series. He was one of the founders of Fund Seeder. Previously, he was a partner at a London-based hedge fund advisory firm, the Fortune Group (2001-2010). He has also been a Director of futures research for some of Wall Street’s leading firms.

Tips for individuals who want to trade:

1. Schwager advises individuals who want to pursue their career as traders to first do extensive reading. He doesn’t recommend any book in particular, but encourages individuals to just go and explore different books.
   Check on the web, go to a library or go to a bookstore, if you can still find one these days. However you do it, just pick up different things. Look at different things, See what they’re saying, Once you figure out where you’re gravitating to, read more on that,” he says.

2. He also advises traders to start thinking about ideas based on what they have read and how they could implement them in the market.

3. Then he recommends traders to evolve those ideas into some sort of a methodology for which they can define the rules and come up with risk management plans.

4. Traders can practise dummy trading to check whether their methodology has the required edge to become successful.

• Finally, once traders feel they have an edge, they can start trading with small amounts of money and implement their strategies.

5. Gradually if one is trading with real money successfully, then one can increase the amount as per his comfort.

Tobias Carlisle

Tobias Carlisle is the Chief Investment Officer at Acquirers Funds, and is best known as the author of the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations.

A graduate from the University of Queensland in Australia with degrees in Law and Business (Management), Carlisle has plenty of experience in investment management, business valuation, corporate governance and corporate law and has also worked as an analyst at an activist hedge fund.

7 principles of deep value investing

Carlisle lists out 7 simple principles for deep-value investing that one can follow to ensure solid returns in the long run.

1. Focus on cash flows: Carlisle feels a share of a company shouldn’t be considered a mere ticker symbol. When one invests in a stock, she becomes a partial owner of that business. This, Carlisle believes, has two important implications. First, a shareholder has rights and can exercise those rights by voting at meetings; and secondly, an owner pays attention to all that a company owns and owes, especially its cash.

2. Zig when the crowd zags: Carlisle encourages investors to follow a contrarian approach towards investing, and advises them to avoid following the herd. But he warns that before taking a contrarian approach, one should know the crowd’s consensus, which can be found in the difference between a stock price and its value.

3. Find a margin of safety: Deep value stocks have a built-in margin of safety, and they are undervalued because the possibility of a worst-case scenario is already priced in. That gives it a high upside/low downside bet, he says.

“The worst-case scenario provides a low downside. So you can’t lose much if you’re wrong. But if you’re right, the high upside can bring exceptional returns. So even if you’re right as often as you’re wrong, you do okay. Be more right than wrong, you will do great,” he says.

4. Be cautious of fast growing companies: Carlisle says fast-growing and profitable companies attract competition, leading to erosion of margins and profits. Although moats do help, strong and sustainable moats are hard to find, and it is tough to gauge whether a moat will remain strong and sustainable in the future, he says. Also, due to reversion to mean, over time, high growth and profit companies eventually become just average companies.

So Carlisle advises investors to look at companies that are currently facing difficulties and have prices that reflect those challenges.

5. Don’t have a concentrated portfolio: Carlisle believes a concentrated portfolio focuses only on a few high performing stocks for investment due to which it comes with two important trade-offs. First, a concentrated portfolio is more volatile than a diversified one, so a whole good year for the market can be a great year for the portfolio, but a bad year can turn out to be a terrible one.

6. Follow simple, concrete rules to avoid errors: Investors should follow simple concrete rules that can be both back-tested and battle-tested to avoid major errors. Back-testing checks the rules for theoretical strength, especially when tested in different countries and different stock markets. A battle-test can ensure the rules work in the real world. “No strategy has ever failed in theory. Almost all have failed in reality,” says he.

7. Have patience for long-term success: Carlisle says investors often misprice stocks of companies that are facing tough times. This, he feels, can be an opportunity for patient investors willing to put up with below-average results in the short term. Carlisle believes investors who follow a buy-and-hold strategy and wait for a turnaround to happen have an enduring edge as they are focused on the long-term gains.

Geraldine Weiss

Geraldine Weiss (born March 16, 1926) is the co-founder of Investment Quality Trends and is nicknamed “the Grande Dame of Dividends” and “The Dividend Detective” for her unconventional value approach investment style by focusing on a company’s dividends rather than earnings. Geraldine Weiss, known as the ‘blue chip stocks guru‘ is the founder of the advisory newsletter, Investment Quality Trends. She is also a co-author of two books.

Weiss says, she shortlists companies that meet six “blue chip” criteria:

1. The dividend must have been raised five times in the past 12 years
2. Have an “A” credit rating from S&P
3. At least five million shares must be outstanding
4. It must have at least 80 institutional investors
5. A total of 25 uninterrupted years of dividend payouts
6. Earnings improvements must have been recorded in at least seven of the past 12 years

Weiss’ 7 investing rules

Weiss came up with seven rules of investing from her years of experience in the investing world, which has helped investors of all ages from time to time to make better investment decisions.

1. Stocks must be undervalued as measured by its dividend yield on a historical basis
2. It must be a growth stock that has raised dividends at a compound annual rate of at least 10% over the past 12 years
3. It must be a stock that sells for two times its book value, or less
4. It must have a price-to-earnings ratio of 20 or less
5. It must have a dividend payout ratio of around 50% to ensure dividend safety plus room for growth
6. The company’s debt must be 50% or less of its market value
7. It must meet a total of six “blue chip” criteria