India Fund Performance Compared to Index -Sensex(in %)
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Thursday, September 13, 2007

My Investment Principles

- Stock prices without details about the company does not indicate if a stock is over or undervalued. e.g Rs. 10,000/- per stock may be undervalued for a company while Rs. 10/- may be overvalued for another.

- Do not invest in stocks if you cannot or have no plans to keep the money invested for at least 3 years.

- Don't panic on price fluctuations (for no reasons which affects the company/ industry). Check to see if it is a good opportunity to buy shares of strong companies.

- Before making the investments itself, be prepared to see the stock loose value of up to 50%. And think about what you will do in case that happens. This will act as a practice and you know know exactly what to do when that happens.

- Do your research at a regular intervals (3-6 months) on each of your holdings to verify if all the reasons for which you brought the asset still holds.

- Listen to others and advices, but always do your own research before acting on it. Remember: advice is free, but its your money which is at risk!!

- Invest in good companies only. Don't invest just because a stock is going up or down.

- Read about the investment principles, broaden your knowledge.

- Write down your investment principles, and look at it before you make an investment to make sure that is it according to your principles and does not deviate from your principles.

- Don't invest in stocks to make some quick bucks!! Yea, you may get lucky few times, but when you try to repeat it, you may loose everything. Invest for long term to create wealth.

- After making an investment, if you think you did a mistake, don't wait; just sell that asset and exit. Even if it is down, don't wait it to come back to same level, it could become worse. You will be able to find better opportunities; if not, you are better of not investing at that point of time and keep looking.

- Don't have too many stocks in the portfolio. Yea, diversification is good, but I would rather invest in few very good undervalued companies than to invest in many companies to reduce the risk. If you are not sure, choose index funds.

- Don't invest all of the available fund to an asset at one time. Make multiple transactions over a period of time. Don't think right now is the best time to buy or sell, and that you will miss the opportunity. Remember that you are investing for long term and investing everything at one time can do more harm than good.

- Understand that you are investing in a business. Allow the capital to be used and give the business time to grow and provide returns.

- Don't get into the game of chasing the price and timing the market. You may succeed a few times and make 'some' quick money, but I doubt that anyone can do it repeatedly over a long period of time. But remember, you are not in it for some small quick bucks, but to create wealth which lasts for a very long time.

- Choose an investment strategy which will keep you happy for a very long period of time, not just for few days.

- Never invest with money you don't have!!! "To make money they didn't have and they didn't need, they risked what they did have and did need. That is plain foolish!!" - Warren Buffet on Long Term Capital Management (LTCM) bosses.