Short Investing Rules

23 Tiny Rules of Investing

1. Stories are favored in the short-term. Fundamentals outperform such stories in the long-term.


2.  We are overly-diversified if we can’t even remember the names of the funds and stocks we hold in our portfolios.


3. 90% of the time, investing is driven by behavior. It’s the battle between controlling our own emotions and the sentiments of others who participate in the rally. The one who manages better wins remarkably.


4. Successful Investing is not about creating perfect Excel models. It revolves around Behavioral Psychology, History, Finance, and various other disciplines.


5. Whether we earn in 7-figures or eight, we wait impatiently for the weekends and holidays. Because that’s when we binge on our favorite shows, travel places, pursue our passions and make memories. Invest early to have control over your time later.


6. We tend to chase fads and ignore companies with simpler business models.


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7. The upside movements overshadow the downside risks.


8. Price movements are scary. Daily monitoring prompts us to act.


9. Learning to enjoy what we usually don’t enjoy is a part of successful investing. Price fluctuations, Boredom, Market crashes, and Recessions to name a few.


10. We often buy what goes up. And sell what goes down. Opposite rarely happens.


11. The return we earn on our investments is inversely proportional to the number of times we churn our portfolios.


12. Even fundamentally strong companies falter down when bears enter the market. Even fundamentally weak companies move up when bears leave the market.


13. The graph of our investment returns is a lot like Sensex and less like Simple Interest. It never moves in a linear fashion.


14. With a rise in income, we raise our standard of living. Hardly we raise our standard of savings. Rarely we raise our standard of investments.


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15. The moment we use an investment account to upgrade our Hatchback to a premium SUV, we ensure that our wealth gets reduced by the same amount. Or even more when realized in terms of future returns.


16. Never underestimate the importance of small contributions. By saving a few thousand rupees today may not make us a millionaire instantly. But over a period of time, these contributions add up and deliver dramatic results.


17. Inaction is one of the most under-appreciated skills when it comes to investing. Enjoy the boredom. And pump up the returns.


18. The success in the stock market comes from the good decisions we make. The ability of which comes from the experience we get from the bad decisions we take. 


19. A multi-bagger journey looks easy in the hindsight. It’s painful to sit tight with conviction during turbulent times.


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20. Never let the volatility in stock prices make you sell something which is remarkably strong in its business.


21. We feel excited when it goes up. And turn cautious when it declines. Same stock. Different behavior. 


22. Shun the idea of flaunting fancy stuff. Cars. Jewelry. Frequent night-outs included. Stop competing with the neighbors. Try to imagine what you can’t see. Build monetary wealth to buy real wealth – Time.


23. Never infuse life savings in buying overvalued stocks while expecting extraordinary returns in the short-term.


Related: 10 Interesting Things I Learned in May 2019



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The cover image has been taken from Bank Rate


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