Mastering the Four Rules of Investing
When it comes to investing, having a clear set of rules is paramount.
The four cardinal rules I abide by are: what to buy, when to buy, how much to buy, and when to sell. These rules serve as the foundation for any investment strategy, whether it’s based on momentum or other factors.
Choosing What to Buy !
With thousands of stocks available in the market, it’s essential to have a method for selecting which ones to invest in. This involves establishing criteria for filtering through the vast array of options and identifying stocks with the most potential.
When to Buy ?
Deciding when to buy is equally crucial. Timing plays a significant role in investing, as money has a time value and there are opportunity costs to consider. Establishing rules for when to enter the market helps ensure that you make the most of your capital.
How much to Buy ?
Another vital aspect is determining how much capital to allocate to each stock. While some stocks may seem exceptionally promising, it’s essential to avoid over-concentration in any single asset. Establishing guidelines for position sizing helps manage risk and diversify your portfolio effectively.
When to Sell
One aspect of investing that many overlook is knowing when to sell. Having a clear exit strategy is crucial for protecting your gains and managing potential losses. Establishing rules for when to sell, regardless of whether the trade is profitable or not, helps maintain discipline and prevent emotional decision-making.
Planning Ahead for Success
Planning ahead and scenario building are essential components of successful investing. Anticipating various market conditions and having predefined rules for action ensures that you’re prepared for whatever the market throws your way. By adhering to your established rules, you can navigate the ups and downs of the market with confidence.
WeekendInvesting Strategy Spotlight – Mi India Top 10
BAJAJ AUTO has been an exceptional performer for Mi India Top in the past year. The success of BAJAJ AUTO has contributed immensely to the overall good performance Mi India Top 10 has achieved.
There is one crucial aspect we would like you to understand in this case. BAJAJ AUTO has a 1.05% weightage in Nifty 50. Effectively, a 100% move in BAJAJ AUTO will only contribute 1.05% gain to Nifty 50’s overall performance.
Whereas, Mi India Top 10 remains bias free in its approach towards weightage allocation and allocates a uniform 10% weight to all 10 stocks in its portfolio.
So performance combined with sufficient bias free weightage gives the portfolio an all round chance to extract alpha from its parent universe.
Use code FY2025 to avail a 25% discount on subscription to Mi India Top 10 (Valid till 10th Apr 2024)
If you have any questions, please write to support@weekendinvesting.com
