The Ten Commandments of Investments:
I’m Dr. Sandeep Gupta, founder of DV Stocks commodities and currencies. We are focused on providing investment advice on stocks, commodities currencies and their derivatives.
Today, we shall discuss about ten commandments of investments…
Know your objectives: know what you want to attain with your trading/investment exercise. It means how much money you want to make and in how much time.
Measure your objective: measure your expected return at appropriate standard that is rate of return on fixed deposit
Rationalize your objectives: you should target 2-3 times the FD return in similar time frame. For instance, if your time frame is one year then your target returns should be 2-3 time one year rate on FD. In todays’ term it’d be 2-3x8% i.e. 16-24%, we can take a mean of that to 20%. It means a rationale objective would be to earn 20% in a year.
Know your requirements: you need to know your requirements to achieve your objectives, can you make that much return by investing in stocks, debenture, commodities or forex etc
You need to know Indian stocks give 12% to 14% annualized return in terms of indexes and if one puts his money in Mid/Small cap stocks returns can be as high as 30% to 40% but that comes at higher risk.
Know Your Skills: know what you can handle – stocks, commodities, Forex, or simply none of the above… know how good you are at handling your own investments, if you are novice like most of the wannabe investors hire a professional like me who has experience of at least 10 years and who puts his money where his mouth is.
Play with Cool Money: i.e. the money that you wouldn’t need for next three years at least. That is the money you can invest and that is the only money you should invest.
Don’t pick bottom and don’t pick top of the stocks…. because nobody has ever done that so far and nobody ever will… It’s like pursuit of absolute and absolute is there to worship not to catch and possess. Instead try to catch bottom of U and Top of umbrella.. (I’ll speak on both impromptu), i.e. start putting money when stocks have receded significantly from their top and keep on putting money in phased fashion at regular interval lasting a few weeks to 3-4 months.
Good time to start investing is when index has slipped 8% to 10% from its recent top and good time to divest is when stock markets hit three years high, then begin to divest 15-20% at regular interval. This is how you catch the bottom of U and Top of umbrella.
Diversify: Diversify in asset classes from stocks, to commodities to Forex. Diversify in sectors – put money in at least five sectors and in 12-15 stocks.
Review: Review your portfolio at least every quarter, look for quarterly update in results, see for change in product offering, change in management etc.
Commandment 10: Last and most important commandment:
Use the Euphoria to get out and the scare and despair to hop in: This means when people are going gaga over stocks, your TV anchor is celebrating Diwali when it’s really around the Holi, you know it’s time to begin your divestment and when people are glum, they hate stocks, the TV anchor feels like having his job lost already, you know it’s time to begin to invest. This is it.
These are the ten commandments of investments. Hope it helped you, for more you could always contact me.
You can also view the video here: