Investing Tip 1: Don't Try to Catch a Falling Knife

Start looking for value plays
Tomas J. O'Loughlin, CFA, of Investment Portfolio Management, suggests that the best investment decisions in hard economic times are counterintuitive.

"Sectors or companies that you liked in good times but have been hit in today's markets may represent buying opportunities."

Buying the best of breed in these sectors can position investors to take advantage of the next bull market.

His checklist in evaluating these firms includes:

• Are they going to go out of business in the next three to five years? • Does the company have a strong management team? • Does the company have both strong financials and access to capital? • Is the company expected to continue to lead in its field?

An investor can't be in a hurry to buy or sell, says O'Laughlin.

"Don't try to catch falling knives," says O'Laughlin, and "try to get a measure of the firm's downside risk."

By looking at the downside risk of firms and by taking an investor's perspective, looking over a three- to five-year investment horizon, versus a trader's point of view, the investor can identify firms with value, O'Laughlin says.

From: http://www.bankrate.com/cnbc/news/investingadvice/tips-for-investing-a3.asp?caret=2a