A very basic view of investment strategy is given below. I will need to explain a few terms below, but do spend time with this chart. In a nut-shell, that is all there is to investment.
Here are some basics you need to keep in mind before using that chart:
- We first need to do research to understand what is a good company and a bad company. I prefer to meet the management before conclusively tipping myself into either category. Companies with hints of fraud (refer to John Hempton's treatise on Chinese companies and some other fraudsters).
- Unclear company refers to company which cannot be classified as either.
- It does mean that you have conclusively eliminated the possibility of apparent fraud. Yet, something about such companies do not feel right. (yes, feel!).
- Alternatively, you are not convinced about the business models of such companies, though the companies may be upright and well governed.