How to be a good investor

I want to take this opportunity to re-emphasize some of our frequently repeated advice.
We’ve been repeating the same thing for last 15 years and continue to repeat it in the decades to come. Good advice is boring and doesn’t change with time.
(Please note that by equity we mean equity funds or index and NOT direct stocks.)
1) The 3 key factors to success in investing are long term orientation, patience and discipline.
2) The minimum holding period for equity investment is 10 years. This is only minimum. The preferred holding period should be in decades.
3) You buy a house, keep it for your whole life and then pass it on to children; equity investments should be viewed in the same way. It is multi-decadal and multi-generational.
4) You don’t look at the value of your house daily, weekly, monthly or even yearly. If you can have the same outlook towards equity as well, you would create huge wealth.
5) There is no short term or medium term. The only term for equity is long term.
6) The biggest blunder people commit is checking the portfolio frequently. You should check it only once a year.
7) People who check their portfolio frequently are unlikely to stay in the market for long and create wealth.
8) Don’t look for one year or 3 year averages. Look only for 10 year averages.
9) The best way to invest is to invest regularly for a long period of time. Time diversification is least understood.
10) Volatility is very normal. Temporary declines are not losses unless you sell due to panic.
11) In markets, declines are temporary and uptrend is permanent. Keep repeating this during corrections and bear markets.
12) Completely ignore macro forecasts and market outlook. No one can predict short term.
13) Once you buy right, all you need to do is sit tight. If you ask me which is the one key trait I’ve learned during last 10 years as an advisor; it is patience. Patience pays and it pays very well.
14) Investor returns are never equal to investment returns because they chase performance. They invest after few good quarters and redeem after few bad quarters. Stay through both good and bad quarters. Then only you would create wealth.
15) Ignore financial media. Lot of it is noise. They amplify your fear during tough times and make you act impulsively. Frequent updates about economy or market are of no use to long term investor. It only has nuisance value.
16) India would go grew well in next couple of decades. So corporate India, hence stock markets, would also do very well. Get the bigger picture correct and ignore every day distractions.
17) I’m confident that equity would beat all the asset classes in the long run. The return would beat inflation and enhance your purchasing power.
18) The biggest risk to a portfolio is not having sufficient exposure to equity.
19) Volatility is not risk. In fact it is a friend for all of you who do SIPs.
20) Individual stocks may require timing in terms of entry and exit. Buy and hold would work extremely well in case of equity funds and index.
21) Actively managed funds have been doing a great job in India. Index investing is still far away.
22) You don’t need great brains to be an investor. Once you invest in few well diversified equity funds, what is needed is patience and discipline to stay the course.
23) Don’t chase performance and keep churning the portfolio. A fund has to be changed only if it under performs benchmark for 3 consecutive years. Changes to the portfolio should be as minimal as possible.
24) Out of 10 years, even a good fund or fund manager would have couple of bad years. Vanguard study shows chasing performers hurts portfolio very seriously. It is a wealth destruction habit.
25) Roughly 2% of investors only hold a fund for 10 years or more. I want all our clients to be in that precious 2%. Only few make it big from the markets and I want all of you to be in that league.
26) Compounding is back loaded. It works well over a long period of time. Give time for your investments to grow and blossom. There is no substitute for time in compounding.
27) Gains always come lumpy. So look for how your portfolio has grown over say a 5 year time frame rather than looking year on year.
28) Time + Discipline = Compounding
29) Wealth Building= Less activity+ Hell a lot of patience
30) 99% of the time, doing nothing is the best thing to do in the market. It is good to be a Rip Van Winkle investor. Activity hurts. Sit still.