I am sceptical about advice as far as equity trading / investing are concerned. I have met some traders who think investors are wasting their time, and some idiotic investors who think traders are wasting their time. I think both of them have a role to play in the market.

I am of the clear view that I CAN play the role of a trader, investor, day-trader, delivery based trader, value investor, deep value value-investor, venture capitalist, vulture capitalist, social investor, …..SIMULTANEOUSLY without a feeling of guilt.

Here are some observations:

1. Part time investing is possible, part time trading is IMPOSSIBLE: I don’t know of a successful part time investor with say 22% cagr over 10 years in trading. Most of the people I know are full time traders – or have employed a professional to do full time trading for them. Of course a portfolio worth Rs. 50L cannot afford a full time manager, it has to be outsourced to a friend or a relative….and that’s not easy!
2. Trading is an awesome career and a very very expensive hobby. Be careful.
3. Beware of tips. It is not the information that is the problem, it is YOUR ability to know how the market will react to one bit of news IN THE TIME FRAME that you are planning to hold the share.
4. Just too many people give you tips – barbers, shoe-shine boys, television anchors, news reporters, journalists, parents, children, …..and you are itching for action!!
5. If you are a serious investor you need to understand Fundamental analysis and apply it with rigor.
6. If you are serious about building a portfolio you should buy a MAXIMUM of 3 shares a year. This will be found by reading about 100 balance sheets, and using some screens.
7. Over your investing life of 35 years you will have a portfolio of 60 shares…trim it down to 20 by applying rigor on a regular basis.
8. Selling a well performing share to buy a better performing share is very very important.
9. Understand the difference between a temporary setback and a permanent loss of value. Indigo fall seems to be temporary, but ADAG is complete erosion of public faith
10. Don’t try finding the top and bottom of the market – that is for graphs to record, not for us to act. I have sold Eid parry at various prices above 300….and then WATCHED IT GO TO 386. My best sell price was 364. Now however, I am better off having sold – gives a lot of leg room in deciding when to buy it back. Not always is this possible. CAVEAT: i STILL HAVE Eid Parry as an investor, but the trading positions have all been exited, not sure when I will buy it back.
11. What holds good for one share may not hold for another share – the market looks for hidden signals..
12. Take your losses – or stagnation quickly. If you bought a share at Rs. 50 and it has not moved over 2 years, YOU HAVE A BIG OPPORTUNITY loss. So take your losses quickly and let profits run..

A dirty dozen is enough I presume…