Chapter 9. Developing a Successful Stock Strategy

Chance favors only the mind that is prepared.

Louis Pasteur

In the movie Wall Street, there is a scene in which the character Gordon Gekko tells the character Bud Fox that "a fool and his money are lucky to get together in the first place." This is a fairly cynical worldview but not altogether surprising considering that the Gekko character was a cheat and that his success in the stock market was due in large part to trading on inside information.

In my experience, you don't have to cheat to realize investment success. Investors also don't have to be particularly talented, but they do have to be disciplined. At the end of the day, if you work hard and are smart enough to save money, then you are entirely capable of managing it.

To be sure, there are avenues other than stocks and the stock market to build wealth. I know many people who have built fortunes in real estate or in one or more businesses. I have friends who have never owned a share of stock in their lives, but who have been very successful in the options and commodities markets. One of my closest friends is flat-out brilliant as a fixed-income manager.

Based on the fact that I wrote this book, publish an investment newsletter, and run an investment management company, however, it should come as no surprise that my preferred vehicle for the long-term building of wealth is high-quality, blue chip stocks. In my experience they provide the most potential with the least risk to ...

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