Engineer's Finance

There are many investment vehicles which promise huge returns. Many actually do have that potential and perform as promised and this can be attributed to many conditions. Some call it luck and some call it strategic decision. Whatever is the reason one can attribute to, the end result is that people are making money from these investment vehicles. I am glad for them that they have done is right and the result is wonderful. I hope that many are in this category but the truth is not so. This category of people who know how to make money with investment vehicles, don’t share much of their secrets.

If they start sharing the secrets then many will be skeptic and one of the best example for this is, Warren Buffet’s Secret. He stated that these are his rules for investing.

Rule #1: Never lose money.

Rule #2: Don’t forget rule #1!

I thought about these rules, even I want the same but I have not figured out how to do that. Then I thought that this must be very simple as the rules. I am glad to share few of my thoughts with you and I am hoping that if you have any such simple secrets then share it back with me.

I have always felt that I buy ticket after the train has left its platform for a journey. This is what happens when I don’t do the homework properly. I should know when the train starts and how long it stops at the station and when it will leave. Though this information is known before hand, people miss the train due to various reasons. Similarly I know I should not lose money in stock market but I still do.

I have realized my mistake and these are some of my findings.

1. When analyzing a company, one should always look into their balance sheet and also their competence in running the company.
2. One should also be aware of the market sentiments. If the majority of people think that the crops are going to fail this season then the prices of the agriculture products will raise due to the huge demand. If you think otherwise then the chances are you may lose your money.
3. “Be greedy when others are fearful and be fearful when others are greedy” – Warren Buffett. This is one of the famous quotes by Warren Buffet. It makes much sense but we are always in the wrong side. The reason being we act on our emotions and not by rules.
4. Set aside some rules that define an entry criterion to the market and exit criterion from the market, if one follows the same meticulously then I think one will not lose the money.
5. Whenever one can’t buy some stock. Don’t buy it. I have done this mistake many a times and lost money. I always wanted to buy blue chip stocks and it was always dearly priced and I somehow managed to buy the stock only to realize that the value of it plummeting.
6. Never buy or sell the shares in lump sum.  Always do either buying or selling in stages. This is because we can’t predict exactly when a share will hit the bottom or top it. So to be in a safer position, do the transaction in parts.

Hope you share some wise findings of your own for the benefit of others. Thanks in advance.