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Avoid Digging Yourself Into an Investment Hole With These Tips Stand by these fundamental investing rules when picking and choosing companies.

By Phil Town

Opinions expressed by Entrepreneur contributors are their own.

In this video, Entrepreneur Network partner Phil Town lays out a few guidelines to keep you from making poor investments.

It can be helpful to know when a stock is overpriced. Even if you understand a lot about a product, but you pay too much, you will not have a smart investing career. This can be boiled down to knowing the difference betwen price and value, or realizing that a price is an arbitrary measurement and may not be indicative of real value.

Town underscores the need to always stay rational. Emotion is the enemy of smart investing. To be a smart investor, you have to stay smart amid price swings.

Town also recommends buying companies on sale. Fortunately for investors, the market is not always rational. Oftentimes, investors will jump on a particular company simply because the rest of their investing peers are doing the same. Pay attention to companies that are well-priced and hold potential.

Click play to hear more investing fundamentals from Town.

Related: 3 Things You Should Think About Before Investing in Tech Stocks

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Phil Town is an Investment Advisor, Hedge Fund Manager, 2x New York Times Best-Selling Author of Rule #1 & Payback Time, and Ex-Grand Canyon River Rafting Guide. Rule #1 Investing is Warren Buffett style investing, teaching you how to buy businesses on sale, with little risk and 15 percent returns. In fact, Rule #1 investing is practically immune to the ups and downs of the stock market.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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