Another dilemma i faced buying small cap is that i am unable to build up the conviction to bet Lakhs on it. I am still find myself not mature enough to visualize that e.g. PAGE would be all over India like TITAN in next 5-10 years. Sure, i miss out multibaggers but capiatal preservation is there if my picks go wrong.

Edited by manish_okhade - 07/May/2012 at 9:40pm

Originally posted by stock_surgeon 1. Never listen to analysts etc. 2. Use the pessimism in the market to buy quality stocks. 3. Use the optimism in the market to sell lemons. 4. Always be ready for a crash, and have readily available cash to utilize the opportunity. 5. Never agree to anyone's opinion blindly. Always, do your own research, apply your brains, and try to find unknown stocks -gems in the market.

SAGE WORDS

Few thing I have learned in my not-to-long hobby of investing.

1. Always look out for company with high and consistent ROE ratio. Seems like people always forget to read the "consistent" part.

2. Avoid company which are
a> Debt ridden (Especially when interest rate are high, or expected to increase)
b> Have corporate governance issue,
c> Are capital intensive (Especially when interest rate are high, or expected to increase)
d> Have erratic earning/ROE/ROCE/stock price movement pattern

3. Try maximizing growth
a> Try to catch companies in their early phase of growth (mostly small/mid-cap player)
b> Get out of company which seems to be reaching end of their growth phase

4. Have solid risk minimization strategy
a> Have a well diversified portfolio (concentrated portfolio, can have higher downside risk, if stocks are not chosen correctly)
b> Have stocks which are trading at lesser PEGY ratio. This will lower the probability of loosing money in bear market (if you have taken care of items in #2)
c> Try to have stocks from defensive sectors (Pharma, consumption), which are less likely to falter in a bear market
d> Try to have leaders from boring sectors. (Example: Mayur Uniquoter from plastics and packaging)
e> Have some cash in hand, so as to exploit rapid, irrational falls in stock prices.

5> Don't let your strategy stagnate
a> Keep in mind that one single strategy won't work well in all market conditions
b> So have your own theories, but always try to disproves your theory with new data, and keep evolving your strategy.
c> Always carve of new data, knowledge, wisdom; keep learning
d> Enjoy the process;

6> MOST IMPORTANTLY, always check your portfolio performance with respect to sensex (portfolio gain - sensex gain). The extra precious time that you are putting in having your portfolio ought to give you an extra edge (above passively monitored sensex) that should be increasing with increase in month of effort. If you are not able to beat sensex month-by-moth (or quater-by-quater), then the logical choice should be to switch to an index fund or a suitable debt instrument.

Some of the best resource on investing
1. ROE/ROCE thread of TED, go through it, it is worth the time
2. Prof Sanjay Bakshi's Behavioral Finance slides. Just awesome. Let me rethink the definition of risk

Mine has been...patience.
always keep a cool head with investing. When u r analyzing, when criticizing, when building positions, when setting targets when doing anythign with your money, always have immense patience.