I had no luxury of spare free cash flows. Some of the things that helped:
1. Common Stock and Uncommon profits by Philip A Fisher.
2. Intelligent Investor by Benjamin Graham.
3. Where are the customers' yachts. Can't remember the author, but the book available from google play.
4. Talking to stock investor friends. Most of my stock investor friends are sane and they do reaffirm many of my doubts and questions.
5. Apply lots of common sense. High PE can be sustainable and also unsustainable, but you have to understand how the business is growing. High PE is not a reason for not buying, if the business growth is sustainable.
Some fundamental principles that I think are very important:
1. You have to understand the business. If you don't understand, its not the right investment for you. Peter Lynch mentioned this in a number of videos.
2. Understand the financials, especially things such as sustainability of profits and whether business will remain viable
3. Price is a function of the business. However high the price is, if the business is not tenable, prices will tumble anyway in due course.
4. Read analyst reports and do your own. At least, it ensures you do the minimum and not do anything less than what analysts are doing.
5. Attend the AGMs at least and query the management. I m surprised that many people don't attend. Its the best time to know whether the guys are the helm are up to the job and continue to do so.
* 6. Not buying or selling can also be a decision well made. Daily buying and selling is not necessarily value investing, though it can be fun.... gambling sometimes.
* 7. Prices fluctuate daily for all kinds of reasons. Be sure you know what you buying, so your heart will not drop when prices start retreating. A price retreat doesn't necessary mean that biz is doing badly and (quite often) its the result of irrational (and rational) investing behaviour of the different market participants.
* 8. Make it a point to write down why you are so convinced about a stock. When you are about to make a buy or sell decision, have a look at what you have previously written and question yourself whether those points remain relevant. Unfortunately, we mere mortals can be extremely "frivolous" and change minds rather quickly. You do not want your "frivolous" self to be making the call and end up with "frivolous" results.
* 9. Both black and white cats also can catch the mouse. Same thing for equity instruments, options, warrants and bonds. But, you have to understand that not all cats offer the same efficiency in catching the mouse. Use the right cat for the job or better still use a pest buster, if you are unsure. The pest buster being a mutual fund with track record.
* 10. Having many counters doesn't mean that you have effectively eliminated risk. In fact, having too many counters end up diluting your rate of return from the good quality stocks, though it also reduces the effect of negative return stocks. Have a few good ones that you understand and thats all that you need.
What would help you even more:
1. Participate in the forums. The intellectual sparring helps to further attest to your hypothesis or otherwise clarify your "blindspots".
2. Make sure you use only funds you can afford to put aside and not see it for a long time to come. 1 month is not long time, unfortunately.
3. Don't sit on your research. If you think a stock is worth looking at, spend time reading about it. The annual report is important. Watching share prices is (interestingly) less important, compared to reading the annual report.
4. Remember you are the biggest enemy to yourself.
PS: 8 June - added some stuff and indicated with *. Those are very pertinent points too.
1. Common Stock and Uncommon profits by Philip A Fisher.
2. Intelligent Investor by Benjamin Graham.
3. Where are the customers' yachts. Can't remember the author, but the book available from google play.
4. Talking to stock investor friends. Most of my stock investor friends are sane and they do reaffirm many of my doubts and questions.
5. Apply lots of common sense. High PE can be sustainable and also unsustainable, but you have to understand how the business is growing. High PE is not a reason for not buying, if the business growth is sustainable.
Some fundamental principles that I think are very important:
1. You have to understand the business. If you don't understand, its not the right investment for you. Peter Lynch mentioned this in a number of videos.
2. Understand the financials, especially things such as sustainability of profits and whether business will remain viable
3. Price is a function of the business. However high the price is, if the business is not tenable, prices will tumble anyway in due course.
4. Read analyst reports and do your own. At least, it ensures you do the minimum and not do anything less than what analysts are doing.
5. Attend the AGMs at least and query the management. I m surprised that many people don't attend. Its the best time to know whether the guys are the helm are up to the job and continue to do so.
* 6. Not buying or selling can also be a decision well made. Daily buying and selling is not necessarily value investing, though it can be fun.... gambling sometimes.
* 7. Prices fluctuate daily for all kinds of reasons. Be sure you know what you buying, so your heart will not drop when prices start retreating. A price retreat doesn't necessary mean that biz is doing badly and (quite often) its the result of irrational (and rational) investing behaviour of the different market participants.
* 8. Make it a point to write down why you are so convinced about a stock. When you are about to make a buy or sell decision, have a look at what you have previously written and question yourself whether those points remain relevant. Unfortunately, we mere mortals can be extremely "frivolous" and change minds rather quickly. You do not want your "frivolous" self to be making the call and end up with "frivolous" results.
* 9. Both black and white cats also can catch the mouse. Same thing for equity instruments, options, warrants and bonds. But, you have to understand that not all cats offer the same efficiency in catching the mouse. Use the right cat for the job or better still use a pest buster, if you are unsure. The pest buster being a mutual fund with track record.
* 10. Having many counters doesn't mean that you have effectively eliminated risk. In fact, having too many counters end up diluting your rate of return from the good quality stocks, though it also reduces the effect of negative return stocks. Have a few good ones that you understand and thats all that you need.
What would help you even more:
1. Participate in the forums. The intellectual sparring helps to further attest to your hypothesis or otherwise clarify your "blindspots".
2. Make sure you use only funds you can afford to put aside and not see it for a long time to come. 1 month is not long time, unfortunately.
3. Don't sit on your research. If you think a stock is worth looking at, spend time reading about it. The annual report is important. Watching share prices is (interestingly) less important, compared to reading the annual report.
4. Remember you are the biggest enemy to yourself.
PS: 8 June - added some stuff and indicated with *. Those are very pertinent points too.
The thing I am scared most is not nightmares or market crashes..... Its my greed that I fear the most.
When people ask what is my target price, I never have any good answer for it because Philip Fisher said before (in Common Stock Uncommon Profit) that the best time to sell is never. Equity investment is buying into ownership, not betting slips.
The path to greatness and wealth is necessarily dangerous.... because greed is a fearsome fore that threatens your success at every step.
When people ask what is my target price, I never have any good answer for it because Philip Fisher said before (in Common Stock Uncommon Profit) that the best time to sell is never. Equity investment is buying into ownership, not betting slips.
The path to greatness and wealth is necessarily dangerous.... because greed is a fearsome fore that threatens your success at every step.