On an average the Indian market has given a 19% return in the last financial year that is the 3rd highest return after Egypt & Brazil who gave the better returns. The underlying is how many made the money because the markets where volatile , ruthless and driven by crisis over the year.
Wondering whether the 20 golden rules holds true for today’s market scenario :
- Your investor’s edge is not something you get from Dalal/Wall Street experts. It’s something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.
- Over the past 3 decades, the stock market has come to be dominated by a herd of professional investors. Contrary to popular belief, this makes it easier for the amateur investor. You can beat the market by ignoring the herd.
- Often there is no correlation b/w success of a company’s operations and the success of its stock over a few months or even years. In the long-term there is 100% correlation b/w the success of the company and the success of the stock. This disparity is the key to making money: it pays to be patient, and to own successful companies.
- You have to know what you own, and why you own it. “This baby is a clinch to go up!” dosen’t count.
- Long shots almost always miss the mark
- Owning stock is like having children –don’t get involved with more than you can handle. The part-time stock picker probably has time to follow 8-12 companies, and to buy and sell shares as condition warrant. There don’t have to be more than 5 companies in the portfolio at any one time.
- If you can’t find any companies that you think are attractive, put your money in the bank until you discover some.
- Never invest in a company without understanding its finances. The biggest losses in stocks come from companies with poor balance sheets.
- Avoid hot stocks in hot companies. Great companies in cold, non growth industries are consistent big winners.
- With small companies, you’re better off to wait until they turn a profit before you invest.
- If you invest $1000 in a stock, all you can lose is $1000, but you stand to gain $10000 or even $50000 over the time you’re patient. You need to find few good stocks to make a lifetime of investing worthwhile.
- In every industry and every region, the observant amateur can find great growth companies long before the professionals have discovered them
- A stock – mkt decline is routine as a Jan blizzard in Colorado. If you’re prepared , it can’t hurt you . A decline is a great opportunity to pick up the bargains left behind by investors who are feeling the storm in panic.
- Every one has the brain power to make money in stocks. Not every one has the stomach. If you are susceptible of selling everything in a panic, you ought to avoid stocks and stock mutual fund altogether.
- There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of newscasters. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.
- No body can predict the interest rates, the future direction of the economy, or the stock market. Dismiss all such forecast and concentrate on what‘s actually happening to the companies in which you’ve invested.
- If you study 10 companies, you will find 1 for which the story is better than expected. If you study 50, you’ll find 5 . There are always pleasant surprises to be found in the stock market companies whose achievements are being overlooked on Wall Street.
- If you don’t study any companies you have the same chance of success buying stocks as you do in a poker game if you bet without looking at your cards.
- Time is on your side when you own shares of superior companies. You can afford to be patient –even if you are missed Wal Mart in the first 5 years, it was a gr8 stock to own in the next 5 years. Time is against you when you own options
- In the long run, a portfolio of well-chosen stocks will always outperform a portfolio of bonds or a money market account. In the long run, a portfolio of poorly chosen stocks won’t outperform the money left under the mattress.
I believe they holds true but have to differentiate between greed & ambition :
The dividing line between ambition and greed is so thin that none of us knows when he crosses from ambition – a positive, healthy attribute to greed – an ugly detestable attribution.