February 18, 2012

My personal ten commandments

I have a few thumb rules in investing which have helped me a lot of over time. These are not some universal  ten commandments but they have kept me out of trouble, especially the tenth one !
Thou shall not buy a stock on a broker or a TV channel’s advice
Thou shall not trade
Thou shall avoid predicting or investing based on short term forecasts or outlook
Thou shall not chase momentum stocks
Thou shall not invest in an IPO.
Thou shall not use leverage
Thou shall learn to live within means so as to have investible funds
Thou shall not buy gold, commodities or any kind of fancy and complicated instruments
Thou shall not chase returns – if it is too good to be true, it is a trap
Thou shall say ‘Yes Dear’ when asked by wife if she looks good in a dress  - most important rule to have  a happy married life J .
You can choose to ignore the first nine rules based on your personal style of investing, but if you ignore the tenth rule – do so at your own peril !!!

23 comments:

Ankur Jain said...

As long as the 10th commandment is in place, you have a long way to go Rohit.

Cheers !

Ankur

Amber said...

Dont understnad what do u mean by gold is complicated investment. I don not think you have spent enough time understanding gold . I believe you are well aware of fractional banking system and how it is inflationary.
Hope you undestand monetary role of gold/silver vs other industrial commodities.

......... said...

Hi Rohit,

Nothing related to this post.
Sensex/Nifty has moved into 20 PEs.

What do you suggest when lets say they reach 25 PE?

Sell all your stocks OR stick to your undervalued stocks ignoring market levels OR buy deep out of the money puts on Nifty?
What have you done in the past in this kinda situation?

Abhishek said...

Great post. All are equally important, including the 10th!!

Abhishek
http://valueinvstr.blogspot.com

Anonymous said...

dear rohit
great that u stick to all your commandments because u no longer is an individual. u r an enterprise with a portfolio, a greatmoat( value investor) and a great following.
and u may not know that some of us made lifetime money reading ur blogs and using commonsense
god bless
we idolize u

Anonymous said...

Hi Rohit:

What valuation range would CRISIL be considered a buying range?
Thanks,

DI

Rohit Chauhan said...

Hi ankur
i tend to the forget the 10th commandment sometimes, and unlike the market, i am immediately reminded of my error :)

rgds
rohit

Rohit Chauhan said...

Hi amber
read the latest article on gold v/s equity by warren buffett in fortune to understand why equities are superior

gold is non producing asset ..whereas equities produce cash flow. over the long term equities are the best performing asset unless you are staring at a complete collapse of the financial system

rgds
rohit

Rohit Chauhan said...

Hi anon
frankly i dont look at the nifty PE that closely...as of yet none of my stocks are overvalued ..so i am ignoring what happens to the index

rgds
rohit

Rohit Chauhan said...

Hi abhishek
thanks for the comment

rgds
rohit

Rohit Chauhan said...

Hi anon
Wow !!! you are talking about me ? even i dont think so highly of myself. anyway thanks for comment.

rgds
rohit

Rohit Chauhan said...

Hi DI
crisil has always seemed fully valued, but its intrinsic value keeps rising. i have held it since 2008 and have not been dissapointed. at the same time i will not buy at current price. maybe 20 times earning ?

rgds
rohit

Anonymous said...

i also have a considerable amount of my portfolio in crisil since a long time, what bother me is the intrinsic value is not rising at a good rate ?

Anonymous said...

Rohit please explain what is ULIP

JK said...

Hi Rohit,

If you won't buy CRISIL at current price, then don't you think that you should sell?

Vic said...

Thanks Rohit again for the nice recap of important points.

Most important is the last one..:-)

Vic

JK said...

HI Rohit,

Sesa- Sterlite Merger. Swap ratio is 3:5.
I can buy 5 sterlite at Rs 590, sell 3 sesa in futures at Rs 687.. and make Rs 97 in the process..

Am I missing something??
What are risks other than event & time risk?
Please suggest.

Mahesh said...

Awesome post! Thanks Rohit

Rohit Chauhan said...

Hi anon 1
i think 20% annual growth in intrinsic value is good ..unless you have higher expectations

anon 2 - ULIP is unit linked insurance plan. it is a hybrid of insurance and mutual funds. some portion of mutual fund return is used to offset the premium expense of the insurance piece

rgds
rohit

Rohit Chauhan said...

JK
i will not buy as i already have a full portfolio position. company is increasing intrinsic value @ 20% p.a ..which is good enough for me to hold it

rgds
rohit

Rohit Chauhan said...

Hi vic
thanks for the comment. yes ..10th point is very crucial :)

JK - have not looked at the deal ..let me check

mahesh - thanks for the complement

rgds
rohit

Rohit Chauhan said...

Hi JK
the tentaive date for merger is Dec 2012 ..thats around 10 months from now. we dont have any approvals yet. so this profit is not really risk free..there is deal and time risk involved in this

rgds
rohit

Anonymous said...

May I have your email address
Thanks
ashokkeval@yahoo.com