No. 14 AN INVESTOR WHO HAS ALL THE ANSWERS DOESN’T EVEN UNDERSTAND ALL THE QUESTIONS
Wholly and whole heartedly agree with this. The more you learn about the market (and about yourself in the process) you realize that you need to ask more about investor behavior and less about market behavior. Yes to be a good investor you need to learn a lot about the company, but you also have to control your own behavior. An over-confident approach to investing will lead surely to complete disaster. Assuming you can read Lynch, John Templeton, and a few other biggies, we need to understand that reading, assimilating and implementing are not seamless. The world is changing. All investment literature is based on the US economy of the 1960s, 80s, etc. when the USA had a demonic control over world resources – be it Africa or Asia. So in different political and economic environment will all that be applicable? One thing that I have learnt from big investors is that one has to put a robust system in place – and adhere to the system. If an exception is to be made, there has to be a very solid reason – and you should know that you are deviating from the system…
No.15 THERE’S NO FREE LUNCH
Sir John Templeton is not the first man who said this, nor the last man to say this. We all know this. Do not invest on whims and fancies. Do not invest because a share was recommended on television, or because you bought their car. Or because it gave you your first job, only job or best job. Some of the best companies may be terribly over-priced when you want to buy it. As on Nov 2016 I am not convinced that Hdfc Bank is a good buy – it is just too damn expensive. Equitas may be a better buy – thanks to Namo’s Demo! Never invest in an IPO (well almost) – it is the place where the sellers are professionals and he buyers are amateurs. I can give you a list of IPOs which were oversubscribed and are now available at a discount – after a period of say 4 years! Be careful. This does not mean you should never buy an IPO – it is a great buy when the overall market sentiment is bad. Pricing is more fair!
Never invest on a tip, in a company that you do not know. Say you have shares of Carborundum Universal, and you get a tip to buy that, sure, add more, but if it is a company that you are hearing for the first time….say Suzlon, be careful, and do some initial research. Ask yourself WHY IS THAT GUY ASKING you to buy a share? Is there a hidden motive? Is he making you the part of his ‘whisper’ group meant to talk up the share? You would be surprised how many investors, people who are well-educated and successful, do exactly this. There is something psychologically compelling about a tip – something for nothing! And even worse, the beginner’s luck makes you look smart too!! Be careful.
No. 16 DO NOT BE FEARFUL OR NEGATIVE TOO OFTEN
It is far more fashionable and bankable to be negative and fearful than sound cheerful and happy. Switch on the Television, or pick up the news paper and you will know what I mean. Do not be fearful or negative too often. For 100 years optimists have carried the day in the U.S. share market. Markets may have gone up, down, sideways – but from 1979 till 2016 the market has gone from 100 to 28000. This is not bad at all, right?
Even in the earlier decades, investors did make money – and they are continuing to do so. There will be corrections, wars, famines, elections, scams, frauds perhaps even crashes. But, over time, shares do go up…and up… and up.
As national economies become more integrated and interdependent, as communication becomes easier and cheaper, business is booming. Yes good companies will go out of business, technology is scary and all prevasive. How people consume news, entertainment, etc. are changing fast, but they markets are giving you good returns. Wealth will increase. By the time we reach 2025—it’s just around the corner, – I think there is at least an even chance that the Sensex would have crossed 50,000.
Chances are that certain other indexes will have grown even more. Chances are other countries may have grown even more. Forget all the nay sayers, remember more Indians will be doing SIP in India. More life insurance policies would have been sold, more DIY direct equity investors will be born, and all the excess money will come into the share market!
Nothing much will change. You will need good principles for investing. Good blogs. Good books.
I hope to be around till 50,000 of the sensex, and even for 100,000.
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