Whether it is bull market or bear market, #TheThougtfulInvestor by @BMTheEquityDesk offers some very useful guidelines for investing. A few quotes from the book:
1) Most Investors can't figure out ki paisa jaldi banana hai ki jyada? (Most investors can't figure out whether to focus on the speed of the return or the size of the gain)
2) An investor has to be lazy in taking profits and agile in cutting losses.
3) The best investment is one which generates a higher rate of return, on a large initial amount over longer periods of time
4) If an investor fears the bear he would never be able to ride the bull
5) Investing is all about the four letter word 'R I S K' and contrary to popular public opinion most investors get rich by avoiding risk and not by taking it
6) The primary driver of price is earnings but the secondary and almost equally powerful driver of prices are the perception of those earnings
7) Buy low and sell high isn't the only way to make money. Wealth is also made by buying high and selling higher
8) An investor who can identify a company with high growth and high pricing power in the initial days of discovery has probably found a potential multibagger
9) An investor makes money if he is able to identify a great management in a great business
10) A company that distributes dividends even while its cash from operations is consistently negative is a time bomb waiting to explode
11) A stock with rising revenues, increasing margins and expanding PE is potentially a big multibagger which does not come too often but when it does all investor should is to pull the trigger
12) The chances of making money multiples manifold with a focused company rather than one which is running multiple businesses under one roof
13) One of the stocks to avoid in the market would be a fast growing, low ROE, low entry barriers business with negative cash flows
14) PE contraction remains the route to losing the maximum amount of money in a stock in the shortest possible time
15) The idea is to sell on confirmation of break in the trend rather than on an apprehension of the reversal because the last leg up is the most vicious of entire move
16) An investor should be able to call a stock as a buy or a sell without taking help from his excel sheet because the potential of the stock should actually stare at the face and not whisper from a distance
17) Illiquid stock without yield is a potential case for catastrophe
18) An investor can achieve large scale price appreciation by quickly changing horses even as one story starts to lose its charm, rather than stick to one stock till eternity
19) An investor should realize that to make wealth all he needs is a few good ideas and not all the great ones with the courage to hold them through the length of the bull market
20) Buying a great business under a questionable management is as ineffective as buying a bad business under a great management as while the latter will not let it die the former will not let it live
21) Not selling a stock with deteriorating fundamentals just because the market price is below an investor's purchase cost is the worst of all possible reasons to hold onto a stock
22) A small cap with slowing sales growth and rising profitability is more a case for concern than a small cap with growing sales and a temporary aberration in profitability
23) The weaker companies generally outperform the stronger ones on the way up while the stronger ones do better than the weaker ones - on the way down
24) Selling a stock to buy it back later on a slight dip isn't necessarily the optimum way to get rich but is surely a nice way to get rid of stocks that will make an investor rich
25) An investor who can spot a secular growth company before it has actually been discovered by the market stands the chance of creating a retirement fund out of moderate amount of deployed capital
26) While buying the right stock at the right time will make money for an investor buying those stocks in the right proportion will make wealth for him
27) Portfolio diversification is for protecting capital, while concentration is for growing it
28) There can't be anything worse for an investor holding a few stocks than to average a losing trade
29) An investor would do well not to try and profit from every move, as no one gets rich by taking small profits off a winning bet
30) Most investors remain focused on trying to find the next big trend rather than participate in the ongoing one
31) It is better to buy mediocre company with strong economic tailwinds than to buy a great business facing strong headwinds
32) A 15 bagger with 3% allocation makes a career but a 15 bagger with 30% allocation can make a life
33) Knowing what not to do in the stock market is more important than knowing what to do
34) No position is too big for a stock that is going up and no position is too small for a stock that is coming down
35) In the market, big money is made by riding the profits and not by taking it
