Ten golden rules of dalal street

Rule 1

Plan for tomorrow, today, start saving for it now! Stagger your investment throughout year earning phase. Invest regularly and invest for long term to buy in at an average price that includes both marketers’ up and down ticks.

Never wait until you have large amount of money to invest. However small the amount you are able to save, start early. The earlier you start, the better are your chances of making great wealth. Remember to make great gains. Time is a crucial factor, as wealth creation is a factor of both the power of compounding and the returns on your investments. Accordingly.

Rule 2

Start early so that the power of compounding begins sooner; time is the magic that converts paisa in to rupees.

In exuberant phase, when we have earned good money from our investment, most of us get greedy, and derivatives and future provide an outlet for the expression of human greed. While such instrument often satisfy the whims of human greed, if taken to unrealistic level, irresponsible investment in these securities can lead to financial ruin.

Rule 3

Do not leverage, it is difficult, if not impossible, to predict short-term trend.
Buy markets not stock. We all know that our economy is in a secular phase of prosperity and the stock market is the best proxy for the growth of an economy. To benefit from our soaring economy, buy the market as a whole and not any single stock. Consequently

Rule 4

Buy stock that mirror the broader indexes, but never buy a single, or a handful of stock exposures. This means that you need to spread your risk across various market segments in the event a particular stock does not perform for reasons beyond the company’s control.
It is easier to predict company earning, but difficult to predict stock prices of the same company in the short run. Ironically, over the long term, stock prices mirror growth in a corporation’s earnings. Therefore,

Rule 5

Look at company earning, not stock prices. Stock prices may tempt on give the wrong impression of company’s welfare. But to build real wealth in equities, you must always rely on declared profits and facts; rather then make decisions based on stock movement.
We all tend to sell stocks when we have made profits and keep the ones that have not appreciated. Eventually, we end up holding a portfolio of companies that are not performing! It is only human to sell for profits and not to want to take losses