From PPFAS stable: Ten Commandments of Investing for the decade(s) ahead

03Jan11

Mr Parag Parikh is considered one of the top value investors in India. His firm PPFAS has a blog in which Mr Jayanth Pai is active. I have enjoyed it and have subscribed to it through an RSS feed. The following is an interesting piece from one of his recent entries.

https://www.ppfas.com/pdf-docs/research/week-reports/2010/wr311210.pdf

https://www.ppfas.net/blog/2010/12/31/ten-commandments-of-investing-for-the-decades-ahead/

In keeping with the festive spirit, I thought of donning the garb of Moses and impart a light-hearted version of God’s ten commandments to investors with a disclaimer that “We do not intend to hurt the sentiments of speculators or day-traders. Resemblance to any person or financial advisor living or dead is purely coincidental”…..

1.You shall have no God other than Warren Buffett: He is truly a living God in the world of investing. It is difficult to hold a candle to him. Hence believe only in Him and ignore the myriad pretenders to his throne.

2. You shall not worship the trading terminal: The terminal is not your temple. Make it your slave. It will always try to tempt you to over-trade. Do not fall for its (and your broker’s) wiles.

3. You shall not take the name of “Investing” in vain: Do not undertake speculative trades and convert them into “long term investments” merely because they are underwater….

4. Remember the Sabbath day: Do not think about stocks on Sunday. Sunday is meant to be enjoyed with your family and not to be spent with CNBC and the Economic Times.

5. Honour your mentors: Do not forget the critical role that they have played in moulding you as an investor when you entered the stockmarket. Treat them with reverence.

6. You shall not murder: By this I mean murdering the definitions of long term investing by treating a day, week or month as “long term”. Think in terms of “years”…..

7. You shall not commit adultery: By this I loosely mean, do not overdiversify your portfolio. Too many stocks is akin to too many mistresses. It is difficult to maintain all of them.

8. You shall not steal: This applies more to agents and advisors. You shall not steal investors’ money by rendering false, biased or unduly optimistic advice. Investors beware….

9. You shall not bear false witness: Do not blindly act and induce others to act on the views and “tips” given by members of the financial media, market experts, technical analysts etc. Doing so will be akin to bearing false testimony to events you never saw.

10. You shall not covet your neighbour’s stocks: Never purchase a stock merely because your neighbour has made money in it. The stock and the timing of the purchase may be completely incongruous with your financial and psychological profile. Being envious of your neighbour will not help you in any manner.

As Charlie Munger once noted “Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun.”

Have a happy and profitable decade ahead…..

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2 Responses to “From PPFAS stable: Ten Commandments of Investing for the decade(s) ahead”

  1. A very good list of commandments. One more important point required for value investors is PATIENCE.

    Avadhut
    analytics dot net dot in

  2. 2 madhavshivpuri

    Great list.


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