22 More Lessons about Stock Investing

Last week, I listed 22 lessons I've learned about the stock market. Here are 22 more lessons to add to the list, each of them learned the hard way. You might say this is my attempt to create a Poor Richard's Almanac for stock investors, with a little bit of Murphy's Law thrown in.

23. All else being equal, it's better to buy a stock near its 52-week low than its 52-week high.

24. Month-to-month swings in stock prices are completely unpredictable. Anyone who tells you different is arrogant, confused, or trying to sell you something.

25. When short-sellers are piling into a stock, avoid it. Of course the shorts are wrong sometimes, but they have more to lose than you do, and there are lots of other stocks you can choose from.

26. Stocks can stay overvalued for years. Over time, the market rises, so when you short stocks, the odds are against you from day one.

27. Dividend growth, not the absolute level of the dividend, is what's important. A company that can't--or won't--raise its common stock dividend is just a bond without a senior claim on the assets.

28. In every bear market, the pundits loudly proclaim, "Buy and hold is dead." It never has been, and it isn't now.

29. Overpay and hold is dead.

30. If you can't value a stock, you shouldn't buy it, even if its price has gone down and is much cheaper than it used to be.

31. When a non-REIT stock yields more than 5%, avoid the stock. Chances are high that there's something wrong with the company's business model.

32. No one cares about tainted research when stocks are rising.

33. Fewer than one in 10 stocks are "long-term buys" at any given time. Thus, the ability to say "no" is much more important than the ability to say "yes."

34. Patience is a profitable virtue. Impatience is an expensive vice.

35. Few investors can resist the temptation to trade often.

36. Frequent trading is a crutch for those who don't have patience, conviction, or confidence in their ability to analyze a company.

37. You aren't right or wrong about a stock until several years after you've bought it. In the meantime, you're either lucky or unlucky.

38. Hold onto your winners. Often, there's a reason why they're winners.

39. The answer to "How low can it go?" is often zero.

40. Almost everyone is disappointed when stocks go down. This is illogical. Investors who expect to be net purchasers of stocks over the next 20 or 30 years should wish for a 20-year bear market in which stocks are screaming bargains, followed by the greatest bull market in history just as they're cashing out.

41. When a company gets more than 15% of sales from any one customer, avoid the stock.

42. Nearly everyone on the Forbes 400 list of richest Americans falls into one of three categories: entrepreneurs, buy-and-hold investors, and those who inherited their money. Only a couple of market-timers and technical investors are on the list, and there are no day traders.

43. Most stocks are slightly overvalued most of the time.

44. Most people spend a lot more time thinking about reward than risk. They've got it backwards.