Short Investing Rules
The post “Short investing rules” by Morgan Housel is one of the best I’ve read in a long time. I’ve come up with my own set of short rules for the average person to follow when investing in Indian stocks. These rules are not gospels of truth, and they haven’t been proven to be true. My own observations, learnings, and experiences in the Indian stock market have led me to come up with these ideas.
Do not follow Warren Buffett without thinking about what he might do next. When you drive on the Indian roads, you can’t just look at the road signs and drive on.
Put yourself in the shoes of Sherlock Holmes or Hercule Poirot when you read the annual reports of some Indian businesses.
Like the Kurunji flower (Strobilanthes Kunsthaus), which only blooms once every twelve years, finding a truly great company run by honest and competent people is also a very rare thing to happen. Make sure you bet your house on it if you find one.
Investing
In other words, if you only learn about the Indian market from books or from foreign investing gurus, you’re like taking a math test by reading about science.
People think of the stock market as a huge Financial Chakravyuha. Easy to get in but hard to get out. To become a “Financial Abhimanyu” you must have good investing skills and know-how.
“Minimum Government, Maximum Governance”
is a well-known political slogan that is also true for the individual investor who wants to make money. If you want to invest in businesses, look for ones that have little or no government involvement and little or no oversight.
The promoters (or their family members) might like to hang out with Bollywood movie stars and celebrities, so do more research before investing in these businesses before you buy stocks or shares.
Stockbrokers financial tips
Asking stock brokers financial tips for long-term investing is equivalent to a sheep asking the butcher for health tips for long life.
Keep in mind that fund managers in India consistently outperform the broader market and for a long time.
If there is a lot of activity on a certain stock market for no reason, and you think some trades are being made based on information that isn’t available to the public, then you’re probably right.
In some cases, it might be a good idea to short or even sell the stock that the expert or Pundit says is a “Strong buy” when they appear on the news.
As you wouldn’t try to do a surgery at home, you shouldn’t try to do a financial surgery at home either (if you are not professionally qualified). As a general rule, it’s better to pay a certified financial adviser for help than not know anything at all.
Do not talk about your investments
Do not talk about your investments, even if you don’t believe in “Nazar Lagana” (evil eye).
Ask a mentor or a friend who isn’t interested in your money to help you think through your investing ideas.
People should be more careful about investing in stocks from businesses that are linked to a single political party if they have a strong relationship with that party.
The majority of people agree with the majority of what they say. To bet against them, you might want to check your facts and reasoning a dozen times before you do.
Mr. Market
As a large cruise ship or speedboat, Mr. Market is more likely to turn around and go in the direction of your contrarian position if you go against the grain. Wait for things to work out.
When you are analyzing a business, let’s say you have come up with five positive scenarios and one negative scenario that could happen. Be ready to welcome the negative scenario because it will always be the first one to arrive.
Make sure you’re ready to deal with the possibility that your stock idea that you didn’t like turns out to work out well for a short time. Avoid feeling sorry for yourself and move on with your life.
Price of a stock will keep rising while you are still deciding whether or not to buy it. And the price may start to fall right away after you buy it. When a lot of people are interested in a stock, don’t be interested in it.
If you get something for free, you have to figure out how much you have to pay for it. There is no such thing as a “Free Lunch” in the financial industry.
You should use the TV less as a source of ideas for how to invest and more as a source of fun.
Make a difference
People sometimes don’t care about how accurate or complete their analysis is because they don’t end up making or losing money on a stock because they didn’t pay attention. Good luck and prayers do make a difference.
Always remember that when someone says a quick way to double or triple your money, they are talking about their own money and not yours.
Only a few people will really want you to do well in life and in investing, but most people don’t care that much. Find your real friends and family before you get into trouble.
Now, karma works in a much shorter cycle time than it did before. It works like T+1 or T-2. As soon as you do something wrong in the market, you’ll be sorry for it. Take a good look at yourself, be good, and do good things.
The unwritten rule and one that hasn’t been mentioned above is that “Hard work” is a must for success in any field, even investing. All the late-night oil and early-morning sleep loss will pay off in the long run.
Hard work + Humility = Success.
It’s well-known that John C Bogle said: “Learn every day, but especially from the experience of others.” You can get it for a lot less here.
SOURCE: IPOINFO
