What does a new year
hold for us investors? Nothing much. The market really does not change anything
that day nor do the businesses that they represent. It is still a good time to
recommit on the way we will invest rather than on what we will invest. It is
incidental that it was a great investing year when my portfolio returned 57%
and the index itself returned about 25%. Hindsight as they say is the
best sight. Not to get carried away, let’s remember how investments are behaving matters
less than how we behave. And hence in this New Year blog I would like to
remind ourselves on some of the healthy and profitable investing habits.
Never invest at once all
the money earmarked for equity. Invest over a period of time.
Never allocate a large
portion of cash into a single stock, be diversified (say 10 stocks).
Evaluate
the performance of businesses, whose stocks are owned, once in 3 or 4
months
Moderate expectation of
returns, do not expect more than 12 to 14% pa and make plans accordingly
Do not invest the money
in stocks that you will need back in 3 years - must give time for equity to
perform.
Never invest based on
tips or rumors- you will win some and loose many- its a zero sum game
If you can't commit time
and resources, just invest in a mutual find or an exchange traded fund of the
index
I can assure you that
you have reasonable chance at investing success.
The
booster dose comes from many themes we have discussed earlier; today
I am studying the banking and finance space. The opportunity lies with many psu
banks that are undervalued due to higher provisions, bad loans and non
performing assets. However reasonable valuations and profitability make up
for the low asset quality. Make sure to avoid stocks that are popular with
analysts as in the long run they tend to under-perform the un-analyzed
ones. Analysts avoid stocks with uncertainty that make them
undervalued buys today that will go on to outperform in the long run. Remember
the Cera Example
The successful investors
put a process in place and stick to them, never investing on news or impulse.
Wishing you the very best
in the New Year.
