Golden Rules Of Investing

By P.N.Vijay

P.N.Vijay Financial Services P Ltd E Mail : contact@askpnvijay.com

 Rule 1 : Be clear about your
Investment Tenure

Distinguish between
stocks for long term
& trading. Define
your investment goal
and horizon the day
you buy a stock.

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 Rule 2 : Know your risk levels

It is important to
understand and
evaluate your risk
appetite rather than
going by what others
say. Each person has
his own risk level
which depends on his
age, cash flows,
mental make up
P.N.Vijay Financial Services P Ltd E Mail : contact@askpnvijay.com
Rule 3 : Invest in things you know

It makes sense to
do your home work.
One should invest in
companies whose
business philosophy,
finances, share
valuation you
understand. Try not
to venture into the
unknown.
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 Rule 4 : Diversify without losing
focus
Keep not more than 25
stocks in your portfolio
and never more than
10% in a single stock.
This is based on the
principle of
‘Diversification of Risk’.
Hence, remember not to
put all your eggs into
the same basket.

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 Rule 5 : Look for history and track
record
Buy stocks of companies
with strong history of
profitability and a
dominant business
franchise. Allocate a
majority of your funds
to fundamentally strong
companies. Blue-chip
companies which have a
strong background are
good keeps and always
pay in the long-term.
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 Rule 6 : Think long term
Focus on next 3-4 years
earnings growth, not
just the short-term.
The true value of a
stock can be unveiled
only over a period of
time. Short-term
investing often
manifests itself in form
of speculation, which
can be risky and often
illogical.
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 Rule 7 : Focus on Overall Returns of
companies
Give more importance
to return-on-equity
not earnings per
share. EPS can be
window dressed
through leveraging
but ROE cannot

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 Rule 8 : Watch Interest Rates

Watch interest rates.

When rates go up ,
company profits
suffer. Demand in
the economy
suffers. Shares go
down. This is an
inviolable law

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 Rule 9 : Cover downsides

Use futures and options

cleverly for hedging
your risks and not just
to speculate. Risks can
be mitigated with a
careful use futures and
options after a detailed
market analysis. This
will go a long way in the
limiting the downside of
the portfolio.

P.N.Vijay Financial Services P Ltd E Mail : contact@askpnvijay.com

 Rule 10 : Be a contrarian

Do not follow the herd.

Sell in the euphoria
when everyone is
buying and buy in the
panic when everyone
is selling.

P.N.Vijay Financial Services P Ltd E Mail : contact@askpnvijay.com