Once the strategy is set, do not fluctuate
in your decision each time you decide to invest. This would only mean losses instead of
Let me unveil the 10 commandments of
successful investing today. These commandments strictly followed can make you a successful
investor; make you richer. The successful legendary investors like Benjamin Graham, Warren
Buffet have followed these principles. So why not you…?
1) Decide your investment strategy and
stick to it:
An investor may invest in SIP (systematic
investment plan) and when the market continues to fall he will discontinue his SIP. But
market crash is the right time to continue your SIP. Because, during the market crash you
will get more number of units and the averaging works out in your favour.
Another investor may decide 50:50 as his
debt: equity asset allocation ratio. When the market goes up he may want to invest more in
equity and hence he may change his asset allocation to 30:70. Actually when the market
goes up, one needs to reduce his equity exposure to bring the portfolio back to his
predetermined asset allocation ratio.
Don’t change your strategies midway.
You know what is best for you and this applies to deciding with foresight the ideal
investment strategy for you. Once the strategy is set, do not fluctuate in your decision
each time you decide to invest. This would only mean losses instead of profits.
2) Conduct your own research on stocks:
It is not advisable to just depend on hear
say and decisions of your neighbour, friend, relative or tips from the media or your stock
broker and invest in stocks. It may seem easy but could amount to gamble. Being an
informed investor investing your hard-earned money needs you to ensure if the investment
would meet your financial goal. This could be done through research from various sources.
3) Learn to overlook short term
If you want to be a successful investor,
you need to understand that it is futile to be affected by short-term fluctuations of the
stock market. Investing in good and reputed portfolio ensures good quality of your
investment and capital appreciation in the long run. The short-term volatility of the
share market has got nothing to do with the long term performance of your investments and
achieving your financial goals.
4) Resist investing in penny stock:
Some investors have a common misconception
that it is better to invest in penny stock than in high value stocks. This is wrong as
whether you buy stock at Rs. 5. You need to see the background of the company before
looking at the price of the share.
5) Discard the losers and pamper the
There is a tendency among investors to sell
off appreciated stock and to hold on to depreciated stock in the hope that it would rise.
It is wrong, as it is possible that the shares which are not doing well may continue to
underperform and the shares that are doing well may continue to perform in the future.
It is better to acknowledge you went wrong,
swallow your pride and discard the loser stocks and lessen your losses. Your decision lies
in deciding to suffer a one-time loss for future long-term gains.
6) Look before you leap
Even good company shares bought at the
wrong price can be a poor investment choice. So devise some strategies like SIP, asset
allocation to avoid this mistake.
7) Adopt an open-minded investment
It may be advisable to consider investing
in good companies; however it is wrong to overlook the point that small start-up companies
would make losses. Even such companies with good strategies and growth plans could
contribute to long-term capital appreciation. Always have an open mind in taking your
8) Base your investment strategy on the
Investment decisions based on past
happenings may not always be right. It is better to consider the happenings, but give more
importance to the present and future prospects of the investment. An informed decision
based on the fundamentals and mission of the company helps in long-term wealth creation.
9) Consider tax friendly investments:
Making investment decisions based on tax
considerations may prove counter-productive. However, minimising taxes and maximising
returns after taxation would help. The long term capital gain tax is nil. So if you invest
for a time horizon of more than one year you will have better post tax return.
10) Adopt a long-term perspective:
Adopting a long term perspective is
advisable if you want to be a successful investor. If you want to get short term results,
then you will be able to cultivate only coriander leaves. If you want to grow a large
banyan tree, then you need to wait for years. So if you really want to be richer and
create wealth, you need to be a long term investor.
You could have seen a lot of success
stories of people, who bought a good stock 10 or 15 years back and accumulated a good
amount of wealth now because of the appreciation of those stock prices. But have you ever
heard of a person accumulating wealth by trading in the stock market or moving in and
moving out of the market?
By trading in market you may make profits
in a few transactions, but you will not be able to make profits forever. There is a lot of
difference between making profit in a single transaction and being a successful investor
Knowing vs doing
There is a huge difference between knowing
what we should do and actually doing it. The knowledge piece appears quite exciting; being
interested, learning something new, coming up with that cool idea. The doing part sounds
comparatively like routine work, no matter how easy this work may be to do or how obvious
that it should be done.
Don’t fall into that "Knowing vs
doing gap". Now you know the 10 commandments to successful investing and put it into
practice to become richer.
The writer is the chief financial planner at Holistic Investment Planners
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