Saturday, November 28, 2015

The 10 Commandments Of Investing

Courtesy : Investopedia

The biblical Ten Commandments were intended to act as a driver's manual for the road of life. "Thou shalt not kill." "Thou shalt not bear false witness." These are life's versions of the stop-at-the-red-light-and-advance-when-safe rules of the road. In other words, they are all guidelines to keep people out of trouble. Because life's highways are full of potholes, blind turns and bad drivers, the investing world also suffers from scandals, scams and dishonest companies. Here are 10 commandments for the investing world designed to help keep investors - and their money - safe.

1. Thou Shalt Set Clear Goals If you don't have a purpose or a set of clear goals to guide your investment strategy, don't invest. This sounds harsh, but there are so many types, styles and flavors of investing that, without a particular destination, you will be lost at sea.
2. Thou Shalt Put Thy Financial House in OrderTo become a successful investor, you have to make sure that your personal finances are in order first. Investing without a purpose is bad, but investing when you have high-interest debt is much worse. If you are drowning in overdue bills and credit card payments that you can't meet, take care of those more serious problems before getting too deep into investing.

3. Thou Shalt Question AuthorityInvesting is more about the art of asking and answering the right questions than it is about deciding when to buy and sell. CEOs, CFOs, CPAs, CFAs and all the other acronyms that we use to classify Wall Street's professional caste can't hide the fact that they are human, and that humans sometimes lie. Analysts get kickbacks, CEOs get stock options and recent accounting scandals, show that impartial accounting is not guaranteed.
To question authority, you will need to educate yourself, especially on the subject of financials. Press releases are flakes of snow that rain down on investors and melt away, but financials stick around. Although financials can be tampered with, there is always a trail left behind.

4. Thou Shalt not Follow SheepHerd mentality leads to destructive rampages down Wall Street. Investing passively by sticking to funds, indexes and other mainstays of the coach potato portfolio is a perfectly acceptable practice. The danger comes when people move from being a passive investor to an active portfolio, but they continue to stick with the behavior of being a passive investor.


There is a lot of available information for such investors - much of which is true - but accepting it with an uncritical eye and neglecting to check it yourself is what leads to herding. This includes getting the latest and greatest stock tip from your Uncle George.
A person can effortlessly become one of the investors that the analysts shepherd into various "must-buy stocks" after they have become overpriced. This is how investors find themselves in the herd when skittish investors flee, causing the stock to plunge farther than it should have (whereupon a more astute investor buys a bargain off of your loss).When people buy cars, they try to find the best value for the lowest price; when people buy stocks, they only see the price and, ironically, gravitate towards rising prices. If you are going to invest, you have to check things for yourself in order to find the true value and get the bargains. This takes more time, and it could even cause you to miss out on early gains, but it will tell you when to stay out or when to sell well before the herd hears the bell. 



5. Thou Shalt Be Humble

If you take the first four commandments to heart, there is a good chance that you will perform better than the majority of individual investors and many of the professionals. But sometimes, particularly during a bull market, gains are not dictated by investor actions as much as by having money in the market, so don't allow yourself to become overconfident. Overconfidence often leads to overtrading, taking unnecessary risks and eventual losses when the bull turns bear. Also, remember that you incur commissions every time you trade - this expense can often erase profits or increase losses.
6. Thou Shalt Be Patient


Patience is a virtue for a good reason: It pays for itself. When the market dips, or even when a particular stock dips, there are always investors who panic and sell. Selling should be treated just as seriously as buying. If it is just a bump, ride it out. If there is truly a problem with the stock, take your time as well - you may find a way to use it in a gain-loss transaction that will save you taxes. By the time you hear it, bad news has already settled in - taking your time isn't going to make it much worse.


7. Thou Shalt Show Moderation

Investing too much is not a problem many people have, but it can happen. It is said that the pain of a loss has twice the emotional strength of the pleasure of a gain. For some people, this results in pulling out of the market prematurely, as mentioned above.

For others, losing propels them into successively riskier ventures in an all-or-nothing attempt to win those losses back. Losses are hard to take, but look on the bright side: You can sell a loss to offset a gain in another sector or, if it is in a retirement account, you can use it as a tax write-off. Concentrating your money too much in one area, either by sector, risk level or even keeping it all in the stock market, is a sure way to see more of nothing than all in an all-or-nothing game. 

8. Thou Shalt not Ogle Thy Investment

There is nothing like a market correction or a general upswing to change perfectly normal investors into fanatics who have market updates text messaged to their cell phones every five minutes. As with Fidelity, the axiom, "look, don't touch" is insufficient because the more you look, the more you want to mess around with your investments. It is not clear if it is a symptom or a cause, but this rabid over-monitoring almost always leads to unnecessary churning in sufferers' portfolios


9. Thou Shalt not Court or Spurn Risk

You should never put everything you have into futures, but you also shouldn't hold everything in Treasury bills. There is an appropriate level of risk for investors of every age and creed. 


10. Thou Shalt not Make Heroes of Mere Men

There is no perfect investor. Warren Buffett, George Soros and Peter Lynch have all slipped up from time to time. That doesn't stop them from being great investors who are worth studying and learning from. That said, you should never mimic an investing strategy that you do not fully understand.

There is too much guru-ism going on among investors - so much so that credentials are often lost beneath book titles in which the word "rich" is prominently featured. As with the early caution against trusting authority, you have to question everything. Even if a strategy works for a certain period of time, once it becomes widespread, it skews the system. For example, the publication of Lynch's tenbagger strategy has led to too many people searching for those stocks, leading prices to become inflated to adjust for the non-market driven demand. Skeptics survive on Wall Street much longer than believers.

The Bottom Line

Praying or getting behind the wheel expecting everyone else to follow the same rules you do are both acts of faith. Investing, in contrast, requires practice. To be a good investor, you have to make doubt a part of your creed and make double-checking a ritual. These guidelines should help you on your way. Happy driving.


134 comments :

  1. Sir
    Your views on
    Saint gobain
    Federal bank
    Indraprasatha

    ReplyDelete
    Replies
    1. Sorry, not tracking any of these companies.

      Delete
  2. Thank you Good Shepherd of stock market for an excellent article.

    ReplyDelete
  3. Hi VP Sir,

    Can you please share your views about SPL Industries considering its ongoing growth every quarter.

    ReplyDelete
  4. VP sir,

    When you say you are tracking a stock, what level of tracking does that mean...

    Reading annual reports
    Reading about the industry
    Reading about macro factors that could impact
    Attending AGMs
    Getting on analyst calls
    Calling the CS for information
    Visiting company premises /factories
    Any more ?


    What all do you do and what do you recommend investors (your followers) to do.

    Thanks

    ReplyDelete
    Replies
    1. Nothing above is relevant if management credibility is bad.

      Delete
  5. Want to know your opinion on below three stock for long term investment which I feel could be a multibagger.

    Orient Paper
    Noida Toll
    Hikal Ltd.

    ReplyDelete
    Replies
    1. Hikal is an already suggested stock when its FV was Rs.10.Adjusted to FV split it already returned 2.5 times ,not suggesting at CMP.

      Delete
  6. Thanks sir for the valuable lessons.

    ReplyDelete
  7. Dear VP sir
    The shares of companies serving to Indian Railways will be in sharp focus in the coming weeks based on past record that shows that these shares tend to rally ahead of the Rail Budget that's presented in Feb, 2016. Also these stocks will be in focus due to the opening up of FDI in many rail-related sectors.
    So, Please give your opinion on following railway stocks in above context for long time horizon
    1) Kalindee Rail, 2) Kernex Microsystems, 3) Titagarh Wagons, 4) Texmaco, 5) Stone India, 6) Hind Rectifiers 7) BEML, 8) BHEL

    ReplyDelete
    Replies
    1. As you are aware , most of railway related orders met through tenders .Unlisted Indian entities of multinationals ( even the direct subsidiaries of MNC's ) operating in India , so there may be sentimental positive impact on many listed companies but who will benefit in real terms is a point we should wait and watch.

      Delete
  8. Sir what is ur view on sterlite tech. Can we buy at current price

    ReplyDelete
    Replies
    1. Not tracking any Vedanta group companies

      Delete
    2. Sir ur old recommendation Sunil hitech
      Can we still hold it

      Delete
  9. Sir,

    Please share your view on Inox wind. Is it a good bet on the given scenario?

    ReplyDelete
  10. Your views on Lancor Holdings Sir?

    ReplyDelete
  11. Dear VP Sir, are you positive on any companies for long term, if GST bill is passed in this parliament session?

    Regards,
    Venu.

    ReplyDelete
    Replies
    1. Many company's may benefit at different levels but whether share holders purchasing their stocks at present will benefit or not depends on how much expectation already reflecting in their share price.

      Delete
  12. Good article sir, tasting the fruits of long term holding , thanks for educating small investors ,

    ReplyDelete
  13. sir,

    your current view on old recommended stocks.

    1. Himalaya international Ltd.
    2. Tanla
    3. Orchid chem

    Please share your view sir. as I am posting the request again.

    Thanks & BR,
    Surya

    ReplyDelete
    Replies
    1. Already suggested to exit from Himalaya .

      Tanla and Orchid mentioned as turnaround candidates in coming years

      Delete
  14. Dear vp sir
    Your view on wockharth..?

    ReplyDelete
  15. Dear sir please your view on lumax auto tech

    ReplyDelete
  16. Hello sir,

    Is SUBEX still a good buy at CMP?

    ReplyDelete
  17. Dear VP Sir

    Any reason for not recommending Demerger stocks like Mastek etc.

    Yours

    Venkatesh.

    ReplyDelete
    Replies
    1. De-merged or not , not in a position to comment on stocks I am not tracking.

      Delete
  18. Sir, are you still bullish on your old picks like Zicom security & Balaji Amines?

    ReplyDelete
  19. hi Sir,
    Do you still hold the same view on APM ?
    http://value-picks.blogspot.in/2010/08/apm-industries-buy.html.

    Thanks..

    ReplyDelete
    Replies
    1. Adjusted by stock split , it already multiplied by 5 times.

      Delete
  20. VP Sir, Any opinion about Orient Green Power

    ReplyDelete
    Replies
    1. Not tracking it.Only tracking Websol and Suzlon from renewable energy space.

      Delete
    2. So now wts ur opinion now on Suzlon energy. The debt of the company is very high.. is there any plan of management to reduce the debt..

      Thanks
      Arjeet

      Delete
  21. Hello Sir, can we subscribe DR LAL PATH LABS IPO?

    ReplyDelete
    Replies
    1. Potential Industry but many recent IPO's are pricing aggressively .

      Delete
  22. Dear VP sir, Please your views on south indian paper mills.thanks

    ReplyDelete
    Replies
    1. Already shared around Rs.70, nothing new to add now.

      Delete
  23. V. P. Sir Can we accumulate websol energy at this point?

    ReplyDelete
    Replies
    1. My personal opinion about this stock shared in MMB ,whether accumulate or skip depends on your risk profile and the based on the result of your own study.

      Delete
  24. Sir,The mid and small cap stocks have moved up tremendously .
    Happy to see them go up, but the pace is worrying.Your thoughts
    Regards,
    Kora

    ReplyDelete
    Replies
    1. Be selective , no meaning in buying anything for quick bucks.

      Delete
  25. Sir any updates on shri shakti LPG ??

    ReplyDelete
  26. VP Sir,

    What's your view on Waterbase?

    Recently it's been giving strong revenue for last 3yrs, and improving ROE and CAGR.

    It's also expected to triple it's capacity over next year or so.

    ReplyDelete
    Replies
    1. Not tracking any Thapar group companies.

      Delete
  27. Hi Sir, Thank you very much for guiding many investors. Though I am very new to equity market, I am learning a lot regarding investing from your blog. I feel very lucky that I found your blog at my initial stages of investing . Thanks for guiding us.

    Sir, any value picks or turn around picks in Logistics sector which u r tracking that might benefit from GST though it takes time for GST implementation

    ReplyDelete
    Replies
    1. As of now tracking only Transport Corporation of India

      Delete
  28. Sir, on Patels airtemp - They have target to achieve around 140 cr of revenue for FY16. Also have ambitious target of 200 cr for FY17. But order inflows are little slow. is this because of sector slowdown? But management looks confident as they bough shares around 140 from open market lastly. Any thoughts?

    ReplyDelete
  29. Dear Sir, Kopran is in the limelight since last one 15 days... Touching new highs day after day...

    ReplyDelete
  30. sir whats your view on ALKEM LABS IPO......

    ReplyDelete
  31. Hi VP Sir what are your thoughts on Zenith Fibers and Alembic LTD?

    ReplyDelete
  32. Hi Sir, I have gone through your old reco... Is there any change in your opinion on Bilcare?

    ReplyDelete
    Replies
    1. Minimum ten times commented about it , even below the just previous posting

      Delete
    2. Sorry Sir, missed the comments previously. Just now gone through the comments. Thanks for your valuable time for replying.

      Delete
  33. Hi VP,

    Do you think if the unfortunate incidents unfolding in tamil nadu will have any impact on SKM EGG ?? I know Erode may not be as much impacted but worried about the egg suppliers.

    The second has to be the best for this company and if this misses out due to this, it will be major blow.

    Thanks
    Sunder

    ReplyDelete
    Replies
    1. I think major worry of investors is about the difficulty to access shipment at Chennai Port, but as per my understanding lion share of export going through Tuticorin Port where situation is not serious as Chennai.These type unfortunate incidents are beyond the control of anyone including promoters and let us pray for the best for everyone affected due to this mishap

      Delete
  34. Good morning Sir
    Whats your view about Pennar Ind.

    ReplyDelete
  35. People spread rumours on SKM. There is no flood in Erode, 400+ Kms away from Chennai. Use the opportunity to accumulate SKM...I am from Erode.

    ReplyDelete
  36. Dear sir, what is your view on cybertech ...

    ReplyDelete
    Replies
    1. Not tracking above mentioned stocks.

      Delete
  37. Sir i am holding nelco from tata group from 5 years what to do can it turnoround now and become multibagger

    ReplyDelete
  38. VP Sir, whether KEI Industries a value buy at CMP?

    ReplyDelete
  39. Dear Sir,

    Would be great if you could blog about GST and what it means for the economy. It will help all the followers here to understand its impact better.

    Thanks :)

    ReplyDelete
    Replies
    1. Lot of detailed reports available about this subject in the web , just google.

      Delete
  40. Can we buy essel propack n patels airtemp for long term?

    ReplyDelete
    Replies
    1. Whatever I know and my opinion on both these companies already shared with you .

      Delete
  41. Sir can you please share your views on chevio company ?thanks very much

    ReplyDelete
  42. Sir can u share ur views on cheviot company.

    ReplyDelete
  43. Hi Sir what's ur view on Ujaas energy... and on Akar tools..

    ReplyDelete
  44. dear sir, Are you tracking Alpa Laboratories Ltd...

    ReplyDelete
  45. Wts ur opinion on MIC electronics, SKM, orchid, Subex, Tanla???

    Can any fresh entry possible??

    ReplyDelete
  46. Dear Sir
    i am silent follower of you...

    Grauer & Weil India Ltd
    I would like to know your view on this particular share
    Kindly reply

    Thank you
    Ram

    ReplyDelete
  47. Greetings Sir, Vanakkam !
    Unitech --> I know u r not tracking it ( u replied me befoer one year). But if u have any view on this recently , please share this with me . Iam just trying by chance to get ur view , but sorry for wasting ur time .

    ReplyDelete
  48. Hi VP,

    Pls share ur view on DENIS CHEM LAB LTD , METALFORGE & MROTEK

    Thanks

    ReplyDelete
    Replies
    1. Not strictly tracking Denis Chem Lab , but it is operating in an industry with decent potential.

      Not tracking other two.

      Delete
  49. SIR CAN I BUY SOUTH INDIAN BANK OR TATA POWER??

    ReplyDelete
  50. Sir,
    Please provide your view on Ester Industries - company deals in Engineering plastics same as Shaily Engg.
    Thanks.

    ReplyDelete
    Replies
    1. Product profile of both companies are entirely different.Less than 25 % of income coming from Engineering Plastic.

      Delete
  51. pls share view on vimta labs AND madhucon

    ReplyDelete
    Replies
    1. Performance of Vimta showing improvement.

      Madhucon is comparatively good from the sector

      Delete
  52. Saksoft has moved up suddenly. Nothing in their performance to warrant such a move. Am holding since your first suggestion. Did not sell when you suggested to exit. Will do now.

    ReplyDelete
    Replies
    1. No meaning in waiting for others opinion if one feels sharp rise in stock price is without any reason

      Delete
  53. Please let me know ur views on Tanla Solutions.

    ReplyDelete
    Replies
    1. Already shared my view when stock price was around Rs.17

      Delete
  54. sir
    do you suggest fresh entry in to gelatin based companies, suggested a few years back ?
    none of them has shown great returns over so many years.
    do you see any positives in that industry ?
    please reply.
    thanks

    ReplyDelete
    Replies
    1. Narmada Gelatine suggested @ Rs.93 .Even after bonus issue it is now @ Rs.142 . Not sure what % of return you are expecting from stocks.

      Delete
  55. Sir
    Are you tracking Stampede Capital, formerly Brilliant Securities?
    Global peers include NASDAQ & NYSE listed Virtu Financials and KCG, HFT and market maker firms.

    ReplyDelete
    Replies
    1. The same promoters' another company Green Fire Agri( Formerly North Gate Technology) crash landed from Rs.1582 in 2011 to just Rs.7 in 2011. Not dare to touch such business groups :)

      Delete
    2. Oh my God!! That is one of the most important reason we trust you sir. Integrity. And of course the wonderful picks :)


      Delete
  56. Hi, ur view on Compucom Software?

    ReplyDelete
  57. Hi Sir,

    What are your views on "Gati" and "snowmen Logistics" ?

    ReplyDelete
    Replies
    1. I Prefer Transport Corporation ( TCI ) over them from the same sector.

      Delete
  58. Sir,what is your view on pioneer distillers.

    ReplyDelete
  59. sir can I buy castex tech ? at current price? I want to buy it today. sir pls advice

    ReplyDelete
  60. Sir,
    Please provide you view on Kesoram - reduced their debt by half. Is it good to accumulate?
    Thanks.

    ReplyDelete
  61. hi VP sir,
    your view on IL&fs transportation network and vijay shanthi builders for long term.

    ReplyDelete
  62. Sir, your view on CORAL LAB pls. Thanks

    ReplyDelete
    Replies
    1. Not tracking above mentioned companies.

      Delete
  63. On mmb I could see many platinum investors suggesting the stocks which were already suggested by you long back, one example is guj borosil. They claim as if they discovered it, all the credit for finding such companies belong to you only sir. Feeling proud to be your follower.

    ReplyDelete
    Replies
    1. Credit is not an issue and different people may suggest same stock at different point which is quite normal.If someone making money out of it , that is enough :)

      Delete
    2. Vp ji nowadays for a Suggested stock becoming 2 times also they are calling themselves as multimbaggers creating self reputation. But u simple and humble. You are great!!This is from our bottom of the heart. With thanks, madhu.

      Delete
  64. Any update about elder healthcare ..

    ReplyDelete
  65. Sir your view on manugraph India , a printing machinery company,
    I have some analysis on business, numbers, can you please throw some lights on this,

    Thanks in advance

    ReplyDelete
  66. any opinion ON 7seas sirji

    ReplyDelete
  67. Sir,
    Multiple Promoters of Tree House Education released shares recently and also some engagement with Zee Learn. I am confused that it is a good news or not because there is huge selling pressure in the market.

    Please clear the doubt...

    ReplyDelete
  68. Dear Sir, How do you see the recent IPO of Dr. Lal and Alkem Laboratories valuationwise? Do we not have a listed company who has same or somewhat same products like the above two companies? Would appreciate your views.. Many thanks

    ReplyDelete
  69. Do you think there is no other Pharma company listed in India to compare with Alkem ?

    In case of Dr.Lal , Medinova Diagnostic is in the same business but its financial's are not so great .

    ReplyDelete
  70. Dear VP ji pls ur views on jenson Nicholson thanks in advance

    ReplyDelete
  71. Hi VP,

    What is your current view on your old recommendation superhouse?

    regards
    asm

    ReplyDelete
  72. Dear sir , your longterm view on skmeggs ..i want to invest CMP ..

    ReplyDelete
  73. Sir your valuable view on tv18 broadcast for long term

    ReplyDelete
  74. Dear VP sir,
    Kindly share ur views about il&fs engg.
    Do you think realty & construction sector will be a leader in next 12-24 months!!

    ReplyDelete
  75. Respected Sirjee,
    Would you please share your view on Talbros Automotive Components Ltd?

    ReplyDelete

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