Someone would say if I knew it, why I would be wasting time writing about it. Well the answer to it is that perhaps while I know what all things one should be doing to make money, I may not have the mental and emotional capacities to execute them to the last word. Sharing them at least gives an opportunity to a larger audience to perhaps read and if they wish to, enact and implement them in their lives. Now if there is even one person benefiting from it, then I guess I would have achieved my aim and goal.
To start with, there is never a good, bad or perfect time to invest. It is because except for God no one really knows how things will pan out in the future near or distant. Hence one needs to start from the scratch and basics. Remember how you buy any high value item? You check it from all corners, read a few reviews ask your friends who are using it, check if all its functions have atleast some function at your house and lastly but not the least check if its available at a bargain. When we do so much for buying an item which would hardly appreciate or depreciate in value, doesn’t it make it imperative to carry out perhaps 10 times more research before buying stocks which can go up or down in value many times over and requires quite a bit to be invested. So before actually committing any money, check out the credentials of the company. Now this is easier said than done. What to check is the next question. In this regard I would like to quote the Investment Guru whom the world over praise as the best Warren Buffet. He says always check the management of the company if its honest sincere and professional or not. Are they sincere about their business or prefer to talk more than they work. So profound is the implications of these words that they will be reverberating in the minds of thousands of Indians who would have lost hundreds of thousands of rupees in companies like Satyam Computer Services, Kingfisher Airlines and Suzlon. So what is the common thing about all these three companies? All three have some big mouths to keep announcing grand plans but very little sincereity to show on ground. The end result is that promoter of one of these three companies is in jail for forgery and the other two are on verge of bankruptcy taking down with them the hard earned money of thousands of Middle Class Working people.
Second thing to check is to see if you understand the business that you are investing. For example, if you don’t know what statins mean, why would you be investing in a company like Biocon which perhaps has product portfolio which most of us would have never even heard of. The end result is that you may end up having a Halo Effect about the company, its products and its potential. Now all that may be just that, the Halo. In case of Biocon, it was as the company saw its stock market price at the time of listing some ten years back at 600 falling to below 200 today and never being able to even touch half of what it was then. Needless to say the company hardly ever paid any dividends. It always had a loyal group of investors haloed by its tall claims and announcements.
Third most important thing is patience. Once you have money in hand and have decided to start investing in stocks, you just cant wait to start. And on top of that if there is a stock which you have been following, suddenly falling in price, you will jump over each other to buy as many of those as you can. One can rarely go right with such approach. If the prices have fallen drastically is it not likely that something wrong has happened either in the company of the sector in which it is operating. So one can really not be saved if one is investing in a telecom company when its Licenses are being cancelled. If you are gambling with it, then its ok. Be ready to sell out to the bigger fool. But if you intend to hold them for as long as you would hold your wife, then I guess you will be in trouble, big one at that.
Well there are many other important things to remember. Do check out the next article in this series to read more about them.