We saw how your brain makes you do things which are bad for you as an investor….let us see how to combat it. Importantly, read these aloud and repeat it a zillion times, maybe everyday before you even SEE your portfolio:

1. I will invest in education much before I invest in the markets: Nothing to beat the classics like Random Walk down Wall street, Warren Buffet (pre 2000 he spoke more sense, but still he is a fountainhead, make no mistake), John Templeton, Ken Fisher, – see the ‘must read books’ – appearing somewhere on this blog.

2. Market patterns are difficult, almost impossible to predict: this is a pattern finding part of our brain (fully exploited by the media) which makes us think we can find patterns. The earlier you learn that you cannot, the better it is for you.

3. Trading, is NOT Investing. Trading is not Investing. Please repeat this a zillion times every day. This is Surya Namaskar No. 13.: Hold your ears and put your face between your knees, while keeping your back straight. If you still do a trade which you do not know is a trading transaction or investment transaction, repeat this asana 20 times. Next mistake 400 times. Power of compounding! Once you do this asana 400 times, you will not repeat this mistake. Hopefully.

4. Start today and do a SIP in an index fund: for starting to invest you do not wait for your education to be over, start TODAY….do a SIP..when you finish your education, you can invest in other places! Remember there are many people in the market. Beating all of them is a stupid target. If you can allocate assets intelligently, you may have won the game already!

5. Invest in rock solid business ideas which have worked. A new idea is for Rakesh Jhunjhunwala, Vallabh Bhansali and Uday Kotak to invest in. You are well off investing in Grasim, Hdfc, Sbi, Colgate, TCS, ITC – what has ALREADY worked. If you understand a business, see how it works, understand it and then decide. Like Warren Buffet says ‘create your competency circle’ . Everybody cannot know everything.

6. Focus on your investing – unless it is the index. If it is the index you can chill.

7. Long term is ONE BUSINESS CYCLE – which means FIVE YEARS PLUS. Not one year like the media keeps saying! Media may not know the Capital Market definition of long term and the Income Tax definition of Long Term.

 

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  1. When you say “Start today and do a SIP in an index fund”, could you please clarify what is the specific good-to-best index fund name from Mutual Fund houses like HDFC, Franklin Templeton etc.

  2. One more question. How does doing a SIP in good Index Mutual Fund better and different from doing a SIP in good Equity Mutual Fund?

    do you prefer index mutual funds over equity mutual funds? please clarify sir.

  3. Why not invest in a tax saver fund than a diversified fund ? Both of them perform almost equally. Especially for those who do not use up all there tax exemption.

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