“Everyone is a predator of the investor.”

What can an investor do to avoid being a victim?

Get smarter and become more reasonable, smarter as in properly researching your investments; reasonable means managing your expectations.

“You should not be motivated by greed, which is still what investors mainly are, be motivated by preservation of capital and realistic growth.”

YOUR investment philosophy is to find premium, non-cyclical companies – ones that have a predictable rate of earnings and dividend growth -- and keep his money in them for the long-term.

Guide for investors on how to do so, is a classic blueprint for value investing. While it has controversial bits – for example, Mr. Jarislowsky is an unabashed fan of putting 100 per cent of your money into equities if you’re a long-term investor, something few financial advisers advocate -- his book also deals with how to find value stocks and how to know whether or not to invest in them.

Some of his advice:

Diversify within your portfolio

Pick stocks in four or five major sectors and some specialty groups. Make sure the stocks are top quality and always think long-term -- by making fewer trades, you will also save on commissions.

What top quality means

While Mr. Jarislowsky believes he shares many traits of the value investor, he believes “there’s no sense in buying a value stock unless there’s some growth to it.”

In The Investment Zoo, the zoo also refers to the variety of stocks in the marketplace. There are thousands to choose from. Your job as investor is to find “a few of the best species”—companies that are non-cyclical (so you can avoid market timing) and also will generate earnings of at least 12 per cent annually for many years. These companies should also be the best in their field, with solid management. Out of thousands of companies across the world, Mr. Jarislowsky writes, only about 50 fit all his criteria and are worth a closer look.

Think big

Look at larger companies that are market leaders, because if they hit a rough patch they are more likely than smaller companies to be able to get a second chance.

Know when a stock is cheap

Mr. Jarislowsky suggests comparing historical average price-to-earnings ratios (how many times the annual profit you pay when you buy a stock) to current rates and do the same for dividend yields. So if a stock has a historic P/E ratio of 14 to 15, you want to buy when the P/E is lower and sell when the P/E goes up (say to 24 to 26).

How to figure out the value of a company

A company’s P/E is just the starting point: An investor also has to look at a company’s balance sheet. The key considerations are: bank debt (it shouldn’t be higher than accounts receivable); current ratios (a company should have at least twice the current assets compared with current liabilities).

Check net income and make sure interest charges are low, so that companies will pay or raise dividends. If a company increases dividends while net and cash income are also growing, it’s a good investment possibility.

Mr. Jarislowsky also advocates looking for signs of whether a company is well-managed or not: Are there good cost-control measures? Also, if sales are rising but margins are not improving, it could be a bad sign of poor management.

Not surprisingly, Mr. Jarislowsky believes few individual investors have the discipline or the patience for his kind of value investing, especially during rough bear markets like the one we just experience. “That’s why people like ourselves are in business.

It takes discipline

It’s a point that George Athanassakos, a finance professor, understands only too well. As the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, he not only teaches value investing to his students but also offers seminars to the public. To be a value investor, he says, “people first have to manage their psychology – patience, discipline, strength of character, and most of all stability.”

That’s because it takes discipline not to jump on the latest hot stock or to avoid panicking when those around you are.

Prof. Athanassakos’ description of classic value investing – as developed by Columbia University professor Ben Graham in the 1930s – is very disciplined indeed.

First, investors have to find undervalued stocks by using metrics like P/E ratios.

The second step is to take stocks with low ratios and find their intrinsic value (through statistical analysis, like looking at cash flow and the assets of the company).

“The stock is undervalued if the current stock price is at least one-third below the intrinsic value,” Prof. Athanassakos said.