Computerized Investing > March/April 2008

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I happened across the September/October 2007 CI article on Phil Town’s recipe for how NOT to lose money when investing in stocks. The article went on to describe several considerations for the selection of investments—wide moat, meaning, management, margin of safety, etc.

Since the approach seemed reasonably safe, I divided $200,000 into eight stocks that passed AAII’s Rule #1 screen. Unfortunately, the project was less than successful. In fact, it may be the worst investment I have ever made. Over the course of roughly five months, I lost over 35% of my initial investment. Of the eight stocks, only one should have been affected by the present mortgage slump. However, even in its case, that slump was well identified before this article was printed, which should have been identified in this “close-knit” screen. Don’t get me wrong, I only blame myself for this catastrophe. I broke my own “Rule #1,” which is “Never blindly take the advice of ANYONE else when making investments.” That includes Warren Buffett and Phil Town. People who give advice seem to be able to edit out the bad results and enhance the good ones.

I expect nothing more than for you to take a close look at this article and try to identify what went wrong. I am sure that it cost many people a lot o

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