| If you haven't already noticed, chances are that a big | | | | Morningstar may provide you this information. |
| chunk of your local city's job growth comes from a | | | | Second, since there is always a lag from the date |
| small number of employers. Stores in your local malls | | | | they bought to the date the general public is aware |
| most likely earn a good portion of the annual revenue | | | | of the purchase, you have to do your own due |
| in the last two months of a calendar year. | | | | diligence to determine if a stock of interest is still a |
| All these observations are characteristics of Pareto | | | | bargain. Always go through financial statements and |
| Law which states that approximately 80% of the | | | | read latest developments on the relevant company. |
| effects come from 20% of the causes. What if you | | | | Third, after doing your due diligence, if the stock is |
| were to take this Law and apply it to the stock | | | | still a bargain, you may consider moving forward |
| market? Following the law, we can deduce that 20% | | | | hopefully with confidence by then. |
| of the investors, individuals and mutual funds, make | | | | In summary, there are thousands of stocks out |
| 80% of the profits in the stock market. Some of the | | | | there and you don't have time to research all of |
| individual investors include George Soros and Warren | | | | them. By following Pareto Law, you focus on 20% of |
| Buffett. In theory, you can ride along with them by | | | | the investing community which includes reputable |
| buying the stocks they bought, correct? Well not so | | | | investors with a long track record. Then you do your |
| fast. Obviously, first you have to find out what they | | | | due diligence on the stocks they bought followed by |
| have bought. Reputable institutions such as SEC and | | | | your plan of action. |