Investing Gyan

Discipline over temptations

For the last one year I have not put in a penny in stock market, because I felt that I should pay off my education loan before I start investing (no prepayment penalty meant that I could do that). How is that for a person, who believes that he can make returns of 20% CAGR, and the loan is costing him only 7% net of IT benefit. Hence, to my mind it is important to make the best use of this leverage, and pay off both the leverage and invest with a disciplined approach, rather that first loan than investing. With this new found wisdom I made my first investment of Rs. 15,000 in GE Shipping, which I think is ridiculously under priced.

There will always be cheap stocks

For all those who think that the market is overpriced and the bubble is waiting to burst, I somewhat agree with you, but then, no matter the sensex, their will always be bargain stocks in the market for the most discerning investor. The only problem is your effort in such a market is twice that you would need when the market overall is under priced.

Cash flow woes of salaried people

Salaried people like us get money on a monthly basis, and hence unfortunately, the investment decision is required to be made every month. The option of maneuvering the cash flows, which is available to self-employed and business people is often little. However, this also means that you can do with hitting the research desk only once in a month, and not on a sustained basis, when you have money to invest. The mantra for wealth growth is, invest small amounts every month.

Diversification

No matter how small is your resource pool, it still pays to get your portfolio diversified. It gives much greater liquidity, strength and options, when you need to dig from resources. Yes diversification can be an important reason for liquidity when you want to sell. Further, the common known benefit of diversifying the risk is anyways there.

Don’t get too close to the market

One is best of not monitoring the market on a regular or daily basis. The more times you see the price of a particular stock, psychologically you feel that you have been holding it for a much longer period than you actually have. Then the doubts on your research capability, decision making, and choice start to crop up. Your perception and pulse rate start oscillating with the stock movements. These tensions and problems are best left to the punters, let the investors instead make money.

Happy Investing!!!