Two weeks ago I made a reference to Contravisory founder Ed Noonan's 10 rules for investing, sharing rule #5 about the dangers of a unanimity of opinion.  Since that posting, several people have asked me to share the rest of his rules for investing.  Before listing the rules, a quick word on Ed.  Ed got his start in the investment business in 1962, spending time at Connecticuit Mutual, Advest, and lastly with Fidelity Investments before launching Contravisory in 1972.  Over the years, Ed established Contravisory as a highly respected, recognized leader in equity research and later in his career as an equally effective investment management firm.  Ed had a strong passion for studying the equity markets and learned countless lessons during his 38+ year career.  

Just prior to Ed's passing in 2008, he took time to reflect on his career and impart some final words of wisdom to his disciples at Contravisory.  We each keep his rules handy and consult them frequently to improve our judgement and decision making when it comes to investing.

1.  An approach which protects capital is the foundation of capital growth.

2.  Be skeptical of market pundits, they often suffer from a pride of personal opinion.

3.  Information is constantly changing; remain flexible in all investment operations.

4.  In seeking to avoid the dangers of crowd action remember that a majority of opinion can be sustained.  Unanimity of opinion is more vulnerable to a contrary surprise.

5.  Never average down; you may be expanding a mistake more than opportunity.

6.  Be wary of "cheap" stocks (they have a knack of getting cheaper); "expensive" stocks are more often the winners.

7.  We all have biases; identify yours and how to use it to your advantage.

8.  Invest with the trend, not with the news.

9.  Superior returns are more likely when investing with the market leaders.

10.  Patience is a virtue when investors seek to identify long-term trends.  

Over the next few months we hope to occasionally dissect each of these and expand upon the importance of each.  Have a great weekend everyone.