Equity Investing
 
Investing Principles
 
  • Investment is an art as well as science. It is neither a pure science (else all Analyst would have been Billionaire) nor a pure art.

  • Never borrow to invest in stock market. Otherwise debt will guide your buying/selling decisions.

  • Not to head to hearsays or rumors. Nobody ever has consistently made money with this technique. As Warren Buffett says "With enough inside information and a million dollars you can go broke in a year".

  • Have a reason to sell, an investment should be sold only when you find a better bet.

  • Never apply any thumb rules to book profit. Else you may miss the multibaggers. Rather apply rules in cutting losses. Unfortunately the reverse is true - Most of the investors earn small profits from number of stocks and hold on to positions with huge losses.

  • Technical (Chart) Analysis does works, not always

  • Repeating a mistake in Stock Market could be disastrous

  • What matters the most is VALUE. It is the price you pay for the value you get. Hold the stock as long as the perceived Value is greater than the ruling stock price .

  • Hold decision can be self deceptive, most of the times. Hold the stock only if you are ready to buy more of it. Not, just for the reason it is hovering below your purchase price and you do not want to book loss.

  • Remember : Stock investment is not a rocket science, there is no quick and easy formula of multiplying your wealth.

  • Control your emotions – Majority of investors are often ruled and ruined by emotions. Follow your head, not your heart.

  • Consider cash as good as a stock in your portfolio. Increase its weighatge in your portfolio with increase in indices and vice versa.

  • Successful investing lies in finding out the next multibagger stock and not in predicting the market on Day to Day or Hour to Hour basis. You must have watched on TV how Investment Gurus are busy in predicting the next resistance or support levels and how swiftly they change their decisions. Do you know the success rate of their prediction - 50%, same as flipping a coin!
 
 
Informed Investor
Uninformed Investor
Trader/Punter/
Sattawala
Stock market is
An efficient platform
Scams
Casino
Equities are
Better investment avenue
Very risky
Fast money
Risk profile is
Moderate
What is the risk?
Who cares?
Return expectations is
Moderate
If it works, it works
minimum 100%, in one month
Investment horizon is
3 to 5 years
Short-term works
Less than 1 day
Buying strategy
Regular investor
when market is close to peak
What strategy?
Fundamental analysis
Works
Makes sense, but…
Who cares? What is the target price?
Company management
Extremely important
Indifferent
Does not matter
Technical analysis
Not my cup of tea
Seem to work at times
What is the target price?
Research Report is
A balanced scorecard
What is the target price?
What is the stop loss?

Stock price reflects
Growth prospects
Not so clear
Don’t care
A broking firm is the one that
Does what I say
Knows in and out of markets
Gives tips
Media/Newspapers are
Used as updates
Experts in equities
Source for tips

Harshad Mehta/Ketan Parekh
Unlikely role models
Made money
The Gurus

Rumour mill
Doesn’t get swayed
Easily swayed
Fast cash