Retail Investing- Four golden rules


The dilemma of investing in stock market looms large in the mind of the individuals, especially when it comes to investing directly in equity. It becomes more so in the light of all the news around and the advises that pour in. Secondly a misconception that it is meant for people entirely dedicated to this field or so-called specialists. The real thing is that we need to just keep it simple. A bit of research before we buy anything should be followed here, but that is it.

The golden rule is that as an individual when one invest, one really needs to be an INDIVIDUAL only. You are all alone in this market, never ever come under any influence. Sometimes even not under yours too, once you have made a decision than even do not listen to yourself. The only thing is that you have to take the decision on four parameters.

The first golden rule is you invest surplus money that you have, never ever invest by borrowing. The surplus too is your hard-earned money, remember. And you are investing for yourself and you are not doing any business.

Once you have decided the amount or the surplus you are ready with, do a simple short investigation as you would have done for any thing you buy for yourself.

Now you have the money and the stock you want to go for. Here you need to decide that on this buy how much you are ready to risk or make a loss. For example you have Rs.100000. than you can part with Rs.10000. It would certainly cause pain when you lose money but you need to decide to bear it. And at this very moment you also need to be determined that you would not lose a single penny more, come what may. Whenever your value comes down to Rs.90000, you would exit at any cost. Do not listen to yourself even, if you have other ideas at this point. You have determined your risk. This is technically your stop-loss.

You are entering this trade because you have surplus fund, a stock and the pre determined risk (stop-loss). The final arsenal is, what the profit you want to make is. Yes, the expected return on your investment for which you are ready to take a risk. Pre determine it. In the above example if you want to make 20,000, then again come what may you need to exit the trade at 120000. You would exit with 20% profit. Again do not listen to anyone once you are at this point, not even to yourself.

With your surplus just keep being self disciplined in following the above four golden rules and evaluate your surplus after every 10 trades you have made. The odds would be in your favor.

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About Piyush Mishra

A Black swan fooled by Randomness.
This entry was posted in Investments and tagged , . Bookmark the permalink.

11 Responses to Retail Investing- Four golden rules

  1. Nice Article :) I like this line
    And i think its very important…
    “Sometimes even not under yours too, once you have made a decision than even do not listen to yourself.”

  2. saurabh jha says:

    nice article. can you also write article : reviewing various demat account players in market, sector wise analysis (next 12-18 months). i still see people only investing in blue chips vs companies which are giving better returns. why?

  3. rashmi sharma says:

    Really Nice article:) One needs to review his thinking before Investing….

  4. Ranjeet Singh says:

    Hey Nice article……And 1 Rule I go by…..”Whenever you make a decission, stand by it”……..

    • kartikey says:

      Nice Article!!!!
      Adding couple of point from my experience…
      1)Book your losses as soon as you start realising..
      2)Research as though this is the only stock you want to buy and sell it once your analysis goes wrong as though you never invested any time for it….

  5. debdundas says:

    The most difficult thing is not to listen to yourself. Good discipline, here.

  6. swabby429 says:

    Yes, second guessing oneself is unwise.

  7. eddwak says:

    Excellent advice! Thanks.

  8. dweezer19 says:

    I do nor do investments but this sounds like good advice if I did.

  9. beebeesworld says:

    thanks for reading my blog. I enjoy yours as well. beebeesworld

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