So you are 22 years of age and wish to invest in equities, right?
And you have heard of stories like Wipro, Hdfc, Itc, LnT and the likes. You think this is tough, but what the hell, you want to try, right?
Welcome to the very many people who wish to invest in equities, but do not know where to start.
First things first. If you are doing a career in medicine, or are a lawyer or any other professional, chances are you will not get enough time to do direct investments. You might be better off investing in a mutual fund.
Having said that upfront, I do think that with a little bit of research and some diligence it might be possible to perform better than many of the fund managers. However your ability to beat the best fund managers looks close to impossible.
Start at the very beginning. First of all make YOUR Investment Philosophy Statement. THAT HAS TO BE THE FIRST STEP.
If you do not know where you are going, it does not matter which road you take – sounds so elementary, but it is absolutely true. So make that statement, and be honest about your capabilities – discipline, account keeping, etc. and then take the plunge.
Once you know why you are investing start reading books – and I am not saying that reading has any sequence. Be very careful about what you read. Too many half baked websites on personal finance, equity, etc. – best is stick to the books. Unfortunately or fortunately most of the books on investing are American. No great Indian books, but Parag Parikh has made some start. Good websites by people like Chetan Parekh are a rarity, but yes a good place to start for sure.
Every share that you buy (portfolio) or decide to buy (watchlist) should have a logic, price target, time target, etc. The portfolio and the watchlist should go into a FREE WEBSITE like value research online, Morningstar (I have not used it myself), so that you can analyse it industrywise, and track the performance vis a vis a top fund like I Pru discovery, or a Franklin India Bluechip or Hdfc Equity. Surely you will have your own preferences. What it matters is a 3-5 year performance, but if you are miles behind on a quarterly or a monthly basis for one whole year, you better have a solid, solid reason for that. All the reasons, logic, etc go into an Investment diary – the human mind deletes INCONVENIENT thoughts and data, SO IT MUST BE HANDWRITTEN diary – NOT just a word document saved somewhere on the web.
this is a good beginning. Lots of people will tell you that it is impossible to outperform the fund managers. That is true only for the top fund managers – and some of them have some amazing advantages which you and I can NEVER HAVE. Do remember that all the fund managers have RIL which has pulled down the sensex from the year 2007 to 2013. Sure they will have solid reasons for that, but remember even if you have bought some FMCG share in 2007/8 you would be much better off. Do read fool.com – an American website which believes that individuals can beat fund houses.
I am caught between the academics who say YOU cannot beat the index, and some reality of index beating friends….so the choice is yours.
However if you do invest on your own or through a MF the above-mentioned steps are worth doing…..
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