25 Investing Lessons I Learned in 20 Years

The biggest money in the stock market is made from ‘unknown unknowns’ - opportunities which neither the company nor the shareholders are aware about but that it can successfully tap. For that 2 things are essential: promoter quality and management capabilities.

When you are making a risky bet in the stock market, what you need is not risk management techniques but a comfortable margin of safety.

A true value investor should never make an investment which he has to track quarter after quarter.

The most important trait you need to make money in the stock market is not intelligence, its patience.

In stock market and gambling, one thing is always true: winners bet rarely, and when they do, they bet big. Suckers who bet regularly don’t understand this. So they make the house/exchange rich.

Put your eggs in a few baskets and watch those baskets.

The single most important thing you need while making an investment is Margin of Safety. Everything else is secondary.

Great investing is like saltwater crocodile hunting a prey: it lurks along the water’s edge patiently for long until the potential prey comes really closer, and then grabs it with its full strength.

Reading books about great investors does not have much use other than intellectual entertainment. Real insights come only from understanding their thought process, which is difficult.

After ‘value’, the single-most overused term by investors is ‘moat.’ We live in such an uncertain world where no moat is everlasting. Do you think Tesla, FB, Google etc. have moats and Kodak, GM and GE didn’t have them. God bless you!

There is no need to read investment literature to become a good investor. Study Zen Buddhism and practice non-action.

If you follow the crowd in stock market, you are doomed.

Technical analysis is nothing but fraud. It’s the most ludicrous attempt to find patterns where no patterns exist.

If you follow Sell-side analysts, remember this thing: the big money is made from their Sell-rated names. By the time they upgrade, the lucrative price point will be gone.

Try to identify ‘lever points’ in a company’s performance cycle. They are points where small directed actions can cause significant predictable changes in underlying stock performance.

If you put your ego in investing, the market will break it into pieces.

Positive thinking may help you succeed in other professions, not in investing. Here, negative thinking, i.e., thinking about what can go wrong, will actually help you succeed.

In the stock market, people hate uncertainty more than anything - whether it’s about a company or the market as a whole. But you get the best opportunities in such times.

Evolutionarily, we are not designed to be good investors. Our brains need frequent small bouts of serotonin kicks, rather than one which is available after a long wait.

The secret to having lots of multi-baggers is nothing but resisting the temptation to sell your single-baggers multiple times.

Those who say timing is not important in investing don’t know anything about investing.

Looking for clues in insider buying or selling is ludicrous. They also have not much clue about how a stock will perform in the future.

The only eternal truth in investing is that anybody can go wrong - whether its Warren Buffett or Jimmy Buffett. That is why you always need a Margin of Safety.

Be an “unsure” investor. Make money by tinkering with your hypotheses and constantly updating them as new evidence comes in.

Recipe for multi-bagger: good company, honest management, company on downtrend due to external issues, uncertainty on future, market on a downtrend.

Disclaimer: The views represent the author’s personal opinion and doesn’t reflect the opinion of his employer.