When you choose a career do you expect to get rich overnight? It took a lot of effort for most rich people to get where they have, have they not?

I do not see any reason why people should THINK that they will get returns exceeding 12-15% p.a. in their stocks portfolio. Of course there are some IFAs who keep flaunting higher returns. It looks IMPOSSIBLE – but like they say ‘the market is a great humiliator’ and I hope to be around for 11-15 years so I refuse to say ‘it cannot’!

For most investors it is not necessary to invest in direct stocks -the efforts may not be worth be the effort. Many of our good fund managers have an impeccable track record, and have walloped the index by a nice margin. So an index fund or a good well managed multi cap fund should do the trick for you. However, if you MUST pick stocks what should you do?

  1. buy one or two shares a YEAR – if you start at age 27, you will have 50 shares by the time you retire at 55, that’s ENOUGH.
  2. only about 100 companies have created wealth for the long term investor, stick to this set of 100. Ignore 8900 others.
  3. remember trading is not investing
  4. when you are investing think of being invested for the real long run
  5. i do not know what technology will kill a Facebook and Google, but shampoo, soap and medicines will be there for 100 years…
  6. take a very careful artist kind of an approach – you have 364 days of study to buy one share.
  7. decent data analysis is available on moneycontrol – if you are willing to pay CMIE has an excellent data base to analyze
  8. use these screens to reach the 5-10 companies that excite you.
  9. Balance sheet access is easy these days – the companies website will give you the full annual report
  10. Start by reading the AR from head to toe -IF YOU ARE A serious investor. It may take you 3 years to come to grip!
  11. Look at shares OUT OF FASHION, not the current favorite. So at this point in time it is infra, pharma and software
  12. At this point in time the shares to avoid are OBVIOUSLY banking (June, 2017)
  13. try seeing the top shareholders, and see if employees own shares in the company – that helps!
  14. keep your eyes and ears open – big share transactions are reported in the financial press, as well as the ESOP allotments
  15. i like companies still run by owners rather than professionals – it has worked for me
  16. my best finance companies are ones which are run by the ORIGINAL promoters
  17. what worked for your friend may not work for you.
  18. i do not like India’s biggest infra company – just does not work for me
  19. be alert to corruption / bad news about promoters, be willing to be shocked
  20. do not ignore small items..like an important person shunted to a low job..it could be a demotion for corruption
  21. look for accounts easy to understand. If it is complicated, move on – understanding is vital
  22. read MDA see for contradictions from time to time
  23. ask the management, if they do not answer what you ask, go to the AGM and ask. Or just sell off.
  24. You are the owner, you are entitled to the answers even if you own just say 5000 shares
  25. vote against raising salaries if the market cap has fallen – if you have lost, the ceo too deserves to hurt

 

start with 25….

 

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  1. Check my holdings consolidated across my MFs investments… Highest amount of holdings is in Banking – 17%..

  2. what is AR in point 10.Start by reading the AR from head to toe -IF YOU ARE A serious investor. It may take you 3 years to come to grip!

    & MDA in point 22.

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