INVESTING PRINCIPLES

The idea of buying stocks without understanding the company’s operating functions- its products and services, labor relations, raw material expenses, plant and equipment, capital reinvestment requirements, inventories, receivables, and needs for working capital—is unconscionable, Says Warren Buffett

  • Invest in Great Companies so you can have an urge to accumulate on dips irrespective of wherever the market indices go. On the contrary, one should avoid investing in those stocks which gives a pressure to sell when prices go down.
  • Indices are not benchmark to invest in Great Companies; indices job is to keep churning the stocks on regular basis; just try to think stock as if no indices exist then how would you choose stocks.
  • Set your price to enter into stock and stick to it. Don’t believe in averaging of stock at short intervals; it’s wise to invest with margin-of-safety at first step itself as there have been many examples of stocks price rallying from 2 Rs to 70 Rs and then to 7 Rs and then to 800 Rs; so where will you average will always remain a question. You will go broke at 3rd or 4th step of averaging down.
  • Never use past data to predict on prices rather look 15-20 years data to understand how your chosen stock has undergone turbulences of prices up and down. It will dry up your greed to average the stock and also give you confidence to remain invested longer.
  • Always reinvest dividends in the stock itself because money that makes money can make more money and multiplication of shares will make you rich; not the price appreciation only. It’s the nature of price to fluctuate by 20%. Just feel if a stock remains in the range of 100-140 Rs for 8 years but gives you 2 bonuses of 1:1; then the worth of stock will automatically reach 4 times even if the price doesn’t move much.
  • Regularly refer journals, newspapers to keep yourself aware of market inefficiencies that offer a great businesses to buy at a cheaper price (say at 50%- 70% down) because soon the price will reach to where it has fallen from and you can make double or triple on your money without much of the efforts.
  • Read, read, and read because reading gets you ideas to identify quality stocks.
  • Be disciplined as discipline won’t let you broke at the time of tough market situations.
  • The task is to become rich, not to make others rich. Keep yourself away from price speculation as you won’t be able to get comfortable sleep in nights.
  • Understand the difference between a Stock analyst and Business analyst. Stock analyst gives you an entry and exit price but you go broke when prices go up multifold after exiting. A great business will always give you Dividends, Bonuses and keep on multiplying your money.
  • Make investment with the thought that Stock will never turn up to show you that had you remained invested; I (stock) would have made you free from all liabilities.
  • Do not leave the obvious winner today for the sake of your beautiful thought to put money in a non-quality stock; it’s like gambling with own life.
  • 95% of the impatient people’s money goes to 5% patient people. It’s party time for 5% people always because Stock market is full of 95% people.
  • Speculators have opened shops to make themselves rich; not to make you rich.
  • Invest in a way that you don’t need to give example of others to your children to become like them. Invest in yourself to become an example.
  • Use the stock market to become rich; not to earn 10 % only.
  • Long term investing can earn you huge sums. People have earned up to 50000 (fifty thousand) times with investment of only 10000 Rs. in a stock for 20 years; examples are Infosys, TCS, Eicher Motors, Amara Raja and many others.
  • Stock market is the best mind game in this planet that can turn a poor to rich. Just think over; if you double Rs. 10000 each year, it will turn into a whopping sum of Rs. 1048 Crores (See Below Table) at the end of 20th It’s so simple but people never use computer screen to calculate more than a multiplier of 10% – 30%. And the funniest part is that market gives such opportunities every year to invest in great companies at cheaper price.

Money Compounder

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