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5 Simple rules for every investor

Friday, August 10, 2007 Leave a comment Go to comments

Some simple rules for all investors in the market.
1) Follow long term trend

2) Ride your winners

3) Cut your losers

4) Don’t bet all your money on a single stock or idea

5) Don’t expect all your investments to give you money

May be you guys can add a few more- but please keep it simple!

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Categories: Education
  1. manoj
    Tuesday, August 14, 2007 at 11:19 pm

    Buy a stock with consistent growth and has good fundamentals. Buy the stock when such stock comes down and notice the support levels of scrip.

  2. sagecapital
    Sunday, August 12, 2007 at 12:36 am

    Purple-.
    I understand your point that people just get too short sighted while investing/trading.Long term investments get ‘converted” into short term trading bets as soon as profits are seen and short term “trading” bets get “converted” into long term investments as soon as losses are seen!
    But couple of points in your comment which I didn’t understand:
    You say-“And there’s no denying that with time majority of things have only gone northword”
    Do you know less than 5% of all listed stocks on NSE/BSE have gone northward since May 2006?
    And where do you find the “rock stars’ of 2000 bubble? Many of those “northbound” stars are no where in picture.Do you remember the price of HFCL in 2000? Do you know where Enron traded before collapsing to zero? Does your “generalization” hold good in that case?
    And certainly x, and x-10 is important to me over a 10 year period. Have you heard of compounding?
    A 5% compounded return over 10 years returns-1.62x
    A 15% compounded return over 10 years returns-4.04x
    Now do you want me to ignore this difference?

    Am I missing something here?

  3. purple
    Sunday, August 12, 2007 at 12:11 am

    Too bad if my comment sounded as if I am talking about sitting on dead stock :-), and importantly that comment wasn’t for you but for majority of investors who message on popular forums asking why their stock price has not increased since 3 days. I’m increasingly seeing people getting impatient and loosing money!

    Regarding entry/ exit points, well that’s something one can only speculate. Can you tell me entry/ exit point of RIL today? You can’t guarantee, but can only speculate. And there’s no denying that with time majority of things have only gone northword. Entry/ exit points are for traders, not for investors. If in a 10 years horizon return of x percent versus (x-10) percent is important for you than unfortunately, in my book, stock market in not for you! I must also add here that most of my comments are mostly for investors, not for traders. As in my books, often an intelligent investor can make more money than an intelligent trader.

    my 2 cents …

  4. sagecapital
    Saturday, August 11, 2007 at 11:15 pm

    I am not a sir ..just a friend and well wisher 🙂
    Jokes part- you have shared very relevant points.Thanks a lot!

  5. Shyam
    Saturday, August 11, 2007 at 8:24 pm

    1) While entering and exiting a stock STAGGER
    entry and exit quantities.
    2) While riding the winners TRAILING STOPLOSS should be activated
    3) While entering a new idea STRICT STOPLOSS should be followed.
    4) Do your HOME WORK, and write down your stratergy and stratergy should be put in action. The brain should rule over the heart, do not take emotional decissions.
    5) Use your LOGIC like “Sage Sir”

  6. sagecapital
    Saturday, August 11, 2007 at 3:43 pm

    I disagree with that. If you are sitting on a dead stock, you may hold it for your lifetime but may never see your buying price again!This is typical of “buy and hold” philosophy.
    Timing is important as it determines your entry and exit points.Time is an important variable in how you define trends.

  7. purple
    Saturday, August 11, 2007 at 3:33 pm

    Time is much more important than timing in equity market.

  8. Satish
    Saturday, August 11, 2007 at 11:31 am

    Absolutely…i agree!

    My idea was to put it across as a “don’t” (i.e. a note of caution), whereas, “Take complete responsibility for your investment decisions” doesn’t quite sound like a caution! Just a play of words..

  9. Murtaza
    Saturday, August 11, 2007 at 11:06 am

    Patience pays but don’t hope.
    This will be in conjunction with 2 & 3 above.

  10. sagecapital
    Saturday, August 11, 2007 at 11:00 am

    Satish-This might be also rephrased as- “Take complete responsibility for your investment decisions”

  11. Satish
    Saturday, August 11, 2007 at 10:56 am

    6. Don’t blindly follow anyone’s recommendation, you might end up losing money.

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