All is not lost: 12 rules that can save you further losses
Published on Mon, May 22, 2006 at 11:10 | Source : Moneycontrol.com
Updated at Tue, Dec 05, 2006 at 11:21
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All is not lost: 12 rules that can save you further losses
With the markets sliding by leaps and bounds, you need to keep your calm and find ways to cushion the free fall. Here are 12 strategies that can help you reduce your loss.
Seventh Major Axiom: On Intuition 'A hunch can be trusted if it can be explained.' A good hunch is something that you know but you don't know how to recognise it. When a hunch hits you, try to locate some data in your mind for any familiarity. Then only should you act on it.
Minor Axiom XI: 'Never confuse a hunch with a hope'. Be highly skeptical. Examine every hunch with extra care.
Eight Major Axiom: On Religion and The Occult 'It is unlikely that god's plan for the universe includes making you rich'. You can't only pray that you should be made rich. You will have to work at becoming rich. Mere prayers will not suffice.
Minor Axiom XII: 'If Astrology worked, all astrologers would be rich.' This is self explanatory. Don't trust predictions.
Minor Axiom XIII: 'As superstition need not be exorcised, it can be enjoyed provided it is kept in its place.' In your day-to-day financial matters, act rationally. But, when buying a lottery ticket, give it a full play to amuse yourself.
Ninth Major Axiom: On Optimism and Pessimism 'Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.' In poker and a lot of other speculative worlds, things are never as bad as they seem - most of the times they are WORSE.
Confidence comes not from expecting the best but from knowing how you will handle the worst. Optimism can be treacherous because it makes you feel good.
Tenth Major Axiom: On Consensus 'Disregard the majority opinion. It is probably wrong'. It is likely that the Truth has been found out by a few rather than by many.
Minor Axiom XIV: 'Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.' This is the best way to get a good stock cheaply.
Eleventh Major Axiom: On Stubbornness 'If it doesn't pay off the first time, forget it'. If at first you don't succeed, try and try again and you will succeed in the end. This is good advice for spiders and kings but not for ordinary persons with regard to financial matters. Every trial is a costly error.
Minor Axiom XV: 'Never try to save a bad investment by averaging down.' If the price of the stock goes down after your purchase don't buy more to bring down' the average cost of your total holding. Investigate why the price went down rather than put good money in a bad bargain.
Twelfth Major Axiom: On Planning 'Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's seriously.' This is self explanatory and hence needs no comment.
Minor Axiom XVI: 'Shun long-term investments.' If possible try to stay away fro long-term investments. The author noticed that the Swiss group never took a long-term view of their stock purchases. They always sold out as soon as their targeted profit was achieved.
