5 COMMANDMENTS FOR THE SMALL INVESTOR

5 COMMANDMENTS FOR THE SMALL INVESTOR

Enjoy the five commandments from NDTV Profit:

In the midst of a global financial crisis and tanking stock markets, what should a small investor do? What is apt and what is not? In trying to grapple with this turmoil, is this an opportune moment to buy or sell shares?

Five rules for the small guy:

1. This is NOT different. History is marred with instances of financial bubbles resulting in extreme volatility. Markets will go up and down.
2. Sell when everyone is buying, buy when everyone is selling.
3. Stick to quality shares.
4. Use systematic investment planning.
5. Never, never, never put money into the stock market that you may need urgently and cannot afford to lose.

I tend to agree with the above commandments. Some additional commandments of my own:

1. When you are in a bull market frenzy and for some strange reason you wish to stay invested in equity markets, choose low beta stocks with consistent dividend paying track record
2. Be open to doing just the opposite when you are in the throes of a bear market. Be willing to buy very high beta (but frontline stocks) which are likely to have fallen much more than their low beta counterparts.

Regards,

N

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