10 Investment Guidelines

Mr.Richard Bernstein has been associated with American Investment Research house Merill Lynch for the past 20 years. After the company was merged with Bank of America, many of the Merill Lynch units were merged / closed. Mr.Bernstein who worked as Chief Investment Strategist has suitably named his last research report ( see attachment ) as "10 Guidelines Learned in 20 Years". So goes the old saying : Men become wiser as they learn out of their mistakes. It is not necessary that everyone of us need to do the same mistake. It is better to learn out of others mistake and make use of their wisdom.

Following are the 10 Guidelines:

1. Income is as important as are capital gains. Because most investors ignore
   income opportunities, income may be more important than are capital gains.


2. Most stock market indicators have never actually been tested. Most don’t work.


3. Most investors’ time horizons are much too short. Statistics indicate that day
   trading is largely based on luck.


4. Bull markets are made of risk aversion and undervalued assets. They are not
   made of cheering and a rush to buy.


5. Diversification doesn’t depend on the number of asset classes in a portfolio.
   Rather, it depends on the correlations between the asset classes in a portfolio.


6. Balance sheets are generally more important than are income or cash
   flow statements..


7. Investors should focus strongly on GAAP accounting, and should pay little
   attention to “pro forma” or “unaudited” financial statements.


8. Investors should be providers of scarce capital. Return on capital is typically
   highest where capital is scarce.


9. Investors should research financial history as much as possible.


10. Leverage gives the illusion of wealth. Saving is wealth.