July 22, 2006

My Investing Experiences and Views

Investing in the Stock Market : Lessons learnt by a retail investor

It is said that investing is an art but i think its also much of a common sense.

Its not that i have been investing since many years, infact i am a
small time retail investor pretty new
to the business of investing. Would like to share my experiences and
views. Hope you find them interesting and helpful.

1. Please remember that investing in the stock market is risky
business. Dont invest just because everyone else is.
Understand your risk appetite. Generally, the younger you are, the
more will be your risk taking ability. But it really depends on one's
financial situation and future needs.
It is said that the percentage of one's investments in stocks out of
the total savings should be around 100 minus his present age.
But this is only a generalization, its your hard earned money and
think carefully before you take the decision to invest.

2. Invest in companies whose business you understand well. If you dont
understand then dont invest.

3. Start with a small amount. Stop dreaming about making it big the
first time you invest. Dont buy & sell
stocks frequently, this way you are only making your broker rich. Be
patient and think investment with a long term in mind.

4. Dont fall prey to the attractive schemes of investment companies.
They all are the same but under different banners. Remember their bread &
butter depends on YOU, the retail customer, and they will go to any length to sell
you the "right" fund. This does not mean all investment schemes are
bad but think twice before you commit your money to them. Reviewing
the track record of the company and the fund manager would help
but its not the only criteria as today's winners may not
necessarily be tomorrow's champions.
Understand all the clauses mentioned in the scheme, the risks
involved, investing style of the fund manager and the company in general,
the various fees invloved (referred to as load), if there is any
lock-in period, etc.

5. Dont spoil your's and your family's health by investing a lot in
equities ! Invest a considerable amount of your savings
in bank fixed deposits and government bonds ! The returns are low
but they are GUARANTEED and you may find them very attractive when the
stock market has taken a hit and your portfolio is taking a trip down south.

6. Enjoy the process ! Investing is like playing a game wherein some
win and some loose. If you win, celebrate the success but dont become overconfident as you might soon be the next looser; if you loose, revisit your
investment decision and think what went wrong and how can you aviod making the same
mistake again.

7. Last but not the least, give a part of your earnings to the
community. Ofcourse your aim is to maximize your ROI (Return On Investment) but
it wont hurt if you give back a small portion to the needy and poor around you. Remember that sometimes giving is more satisfying than receiving !


1 comment:

Anonymous said...

Dear Mak :
Good Work.
Can you tell me more detail in how to analyse ROI??????
Suresh Maruthirao