Two of The World’s Greatest Investor

Warren Buffett, the "Oracle of Omaha," is considered by many to be the greatest investor ever. He is also known for giving much of his $40 billion fortune to the Bill & Melinda Gates Foundation, which is dedicated to bringing innovations in health and learning. Buffett is primarily a value investor that closely follows Benjamin Graham's investing philosophy after having worked at Graham's firm, Graham-Newman.

Buffett has several excellent investing rules. You can read about many of them in his company's (Berkshire Hathaway) annual reports, which are an excellent source of investing knowledge.

Here are three of Buffett's rules:

Rule No.1: Never lose money.

Rule No.2: Never forget rule No.1.

If you lose money on an investment, it will take a much greater return to just break even, let alone make additional money. Minimize your losses by finding quality companies that are temporarily selling at discounted prices. Then follow good capital management principles and maintain your trailing stops. Also, sitting on a losing trade uses up time, money and mental capital. If you find yourself in this situation, it is time to move on.

The stock market is designed to transfer money from the active to the patient.

The best returns come from those who wait for the best opportunity to show itself before making a commitment. Those who chase the current hot stock usually end up losing more than they gain. Remain active in your analysis, look for quality companies at discounted prices and be patient waiting for them to reach their discounted price before buying.

The most important quality for an investor is temperament, not intellect.

You need a temperament that neither derives great pleasure from being with the crowd or against it. Independent thinking and having confidence in what you believe is much more important than being the smartest person in the market. Most of the time, the best opportunities are found when everyone else has given up on the stock market. Over-confidence and emotion are the enemies of a high quality portfolio.

The Great Trader Gartman

In the October 1989 issue of Futures magazine, Dennis Gartman published 15 simple rules for trading. He is a successful trader who has experienced the gamut of trading from winning big to almost losing everything. Currently, he publishes The Gartman Letter, a daily publication for experienced investors and institutions.

Here are three of Gartman's best rules:

There is never one cockroach.

When you encounter a problem due to management malfeasance, expect many more to follow. Bad news often begets bad news. Should you encounter any hint of this kind of problem, avoid the stock and sell any shares you currently own.

In a bull market only be long. In a bear market only be short.

Approximately 60% of a stock's move is based on the overall move of the market, so go with the trend when investing or trading. As the saying goes, "The trend is your friend."

Don't make a trade until the fundamentals and technicals agree.

Fundamentals help to find quality companies that are selling at discounted prices. Technical analysis helps to determine when to buy, the exit target and where to set the trailing stop. A variation of this is to think like a fundamentalist and trade like a technician. When you understand the fundamental reasons that are driving the stock and the technicals confirm the fundamentals, then you can make the trade.