8 Most Important Principles when Investing in Equity | Stocks & Mutual Funds | ET Money

The last two years have been a roller coaster ride for equity investors all around the world. We had the Covid shocks and subsequent lockdowns, the Chinese markets had regulatory interventions, the Europeans have the Ukraine-Russia war, the Sri Lankan stock exchange has been sporadically closing and with the US Federal Reserve hiking interest rates, it sure is making the global financial markets quite jittery.
So in this video, we shall put forth 8 principles of equity investing that have stood the test of time & have helped investors make superlative gains
📝 Chapters
00:00 Introduction
01:07 1. Know what kind of investor you are
02:49 2. Expect volatility and profit from it
04:37 3. Control the risk
06:47 4. Have a safety margin
08:08 5. Ignore the noise
09:31 6. Don't use leverage while investing in equities
10:58 7. Mind your emotions
12:51 8. Long term works best
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👉 RESOURCES
📚 The Dhandho Investor : amzn.to/3mONPaG
📚 The Little Book That Still Beats the Market : amzn.to/3HvsKtN
📝 Buffett's Letters to Shareholders: www.berkshirehathaway.com/let...
📝 Charlie Munger’s Talk: fs.blog/great-talks/psychology-human-misjudgment/
📝 Morning Star article by Larissa Ferdinand: www.morningstar.in/posts/54485/7-equity-investing-principles.aspx
📝 Benjamin Graham’s Timeless Principles: www.investopedia.com/articles/basics/07/grahamprinciples.asp
📝 Five Principles of Successful Investing: www.rbcgam.com/en/ca/learn-plan/investment-basics/five-principles-of-successful-investing/detail
📝 KNOW THE KIND OF INVESTOR YOU ARE
In case of mutual funds, it’s about how you allocate your capital across asset classes, passive funds versus actively managed funds and how disciplined you are, as an investor. In the case of stocks, there are a lot more strategy choices: growth investing, income investing, value investing, etc
📝 EXPECT VOLATILITY AND PROFIT FROM IT
Investing in stocks means dealing with volatility. We used the word “volatility” and not “risk” and that’s because these two words are very different yet people think of it to be the same. To put it simply volatility is the up-down movement in the price of a stock or the NAV of a mutual fund and risk should be looked at, as the chance of having a permanent loss of capital
📝 CONTROL THE RISK
There’s an old quote that says “Making money is easy. Keeping it is difficult”. And it’s not just the logic, even mathematics supports that. For instance if your portfolio were to fall by 30% then a subsequent 30% rise in your portfolio will not be enough and one would still come up 9% short
📝 HAVE A MARGIN OF SAFETY
A prime difference between investing in a debt instrument like a bond and investing in an equity instrument like a share is the number of assumptions one has to make. In the case of bonds, it comes down to assessing the probability of the bond issuer paying the interest and principal which is mostly a function of the profits made
📝 IGNORE THE NOISE
Investment noise is the constant drumbeat of news, information and tips that we are all subjected to day in and day out. This noise comes to us via newspapers, TV channels, twitter, KZbin, Instagram, our friends and even our workplace and as a firm rule, one should get into the habit of ignoring this noise to improve one’s odds of investing success.Now noise can be three types. The first is called unusable noise. Secondly, we have an untimely noise. The third noise is hypothetical
📝 DON’T USE LEVERAGE WHEN INVESTING IN EQUITIES
Investing in equities is a speculative activity and by taking a personal loan or using margin trading or options etc. the investor ends up adding an additional layer of speculation on something that already has a fair amount of risk. The advice here is simple: always invest in equities with the money you save up rather than the loans you are offered.
📝 MIND YOUR EMOTIONS
Never invest in equities when you are emotional. Over time, many studies have been conducted that prove that most investors behave irrationally in different situations which almost always leads to investment losses.
📝 LONG-TERM WORKS BEST
Equity investing works best when it’s done for the long haul. There will always be that temptation to book profits, take a punt, jump into a particular sector etc. But if you want to grow your wealth for the next few decades you will need to have a long-term mentality and a plan to go with it
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I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.

[@JunlaiAiguo]

You're correct. I think the smartest way to go is to spread out your investments. By putting your money into different asset classes like bonds, real estate, and stocks from other countries, you can lower the risk if one part of the market goes bad.

[@FrankEword0v]

That sounds like a good plan. In the past two years, working closely with a financial market specialist, I've built a six-figure diversified stock portfolio. Now, I aim to diversify even more this year.

[@Josephtimothyq5]

Talking about a financial market specialist, do you consider anyone worthy of recommendations? I have about 100k to test the waters now that large cap stocks are at a discount... Thanks

[@FrankEword0v]

My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..

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Watching Shankar's video is having financial enlightenment in calm and effortless manner and reading his viewers' comments/views is topping on it. 🙂👍🏻

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Golden words.. My kids r 14:n 5 I want them to watch all videos from ET MONEY To invest early regularly adequately n more Thanks bro👍

[@ETMONEY]

Most welcome. And the formula works .. ₹3000/month with ₹1000 annual increments .. when invested at 12% p.a. .. fetches ₹10 crores in 40 years. Ofcourse, there is a matter of inflation so as Eames said to Arthur in Inception "You musn't be afraid to dream a little bigger, darling"

[@PallaviKiRasoi-0537]

I have been spending lot of my weekend time listening to your videos... thanks a lot.. i am trying to unlearn and relearn lot of things because of you... Thanks a ton

[@ETMONEY]

Glad to hear that and thanks. Wishing you the best!

[@sandaitmech]

Sir You explain the complex mutual fund concepts in very simple way . sir I have 24 lac sonly 14 lac I could invest forlong time for my home and child education how should I invest in MF what should ge the percentage of diversification

[@sachin_2601]

An eye opener video for all investors. I wish I could have got this kind of information when I was in my 20s😁 But anyways, better late than never, at least am investing sensibly in my 30s. So, hope for the best. And thanks for the amazing content as always ❤️

[@ETMONEY]

Thank you. Glad you enjoyed it!

[@praveenaarva966]

Another great insights for novice equity investors.. Thank you

[@ETMONEY]

Our pleasure. Glad it was helpful!

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[@ETMONEY]

:) Thank you for the appreciation

[@nitinchauhan1025]

I have recently started using et money genius...must say it's a great product.... just wanted to know...do you always do momentum investing in stocks ...or will it keep evolving with time.... somehow I don't believe in momentum investing

[@ETMONEY]

Our stock picks are a combination of price momentum and earnings quality. We don't use momentum in isolation.

[@srinaga1975]

Very very useful video; Thanks for posting Mr. Shankar

[@ETMONEY]

You are most welcome. Glad you liked it

[@manishharne2985]

please keep posting the videos... lot of learning.

[@ETMONEY]

Thank you

[@abhijitdebnath9811]

Useful video as usual from Shankar. However, I have been waiting for a market correction for investing some lumpsum amount and also have chosen some Funds like HDFC flexicap, Parag Parikh flexicap, Axis Small cap and one/two sectoral funds in IT and Banking. But now problem arises with Axis Smallcap fund. At current situation, will it be wise decision to invest fresh money in Axis MF and specially in small cap fund where we know liquidity is always a concern? Please suggest.

[@ETMONEY]

Thank you. The general observation is: liquidity concern exist when markets are falling (investors panic) and not when it is bottoming (investors are in a state of shock). In case of small caps, a 20%+ fall has happened so the chances are high that investors will not be exiting their positions so that should allay liquidity fears. Ofcourse, this is our theory of how to look at the situation. If you have a counter-theory, please do reply .. would love to have another opinion on this

[@vivekjimkoshy]

Beautifully put as always 👏👏👏... One question slightly off topic - I have seen some experienced investors saying that the power of compounding doesn't really work in the case of Mutual funds as projected by most of the youtube channels and the fund houses since there are no guaranteed returns on a YOY basis... Also I have seen some of them mentioning that there are some dark sides of mutual funds which the retail investor is unaware of... Can we have your sincere opinion on this, from a long term mutual fund investors stand point???

[@ETMONEY]

Thanks. Can you share the names of those investors and if there is a KZbin link on it? It will help put things in perspective because I am increasingly seeing content creators making videos, tweets and insta-reels out of anything. Worse, I see many people believing in these opinions. In our opinion, it doesn't matter what it is called. For us, compounding is the act of putting together (as its latin root is meant to convey) and whether it happens linearly (like a fixed deposit) or non-linearly (like equity) is not of as much concern. Now, let's shift our attention to mutual funds. I have seen some viewers comment that because mutual funds don't offer a "fixed" growth, therefore it should not be called compounding. OK, let's agree to that .. then what should their growth be called? However in my opinion, a mutual fund is a non-entity in this evaluation because the MF is a combination of stocks. Now, lets say I show a stock which has a high ROCE and this company grows its profits from internal accruals. Which means on a conceptual level, this is what compounding is and that's what is happening here. Now, my argument is .. if compounding is happening with that stock and every stock .. and MF is a combination of stocks .. why is compounding not happening in MFs? That's food for thought. Now, you might have guessed by now, why compounding continues to take the school boy definition. And that's because explaining the view I just putforth is not just difficult but is impossible for the majority. People take the easy way out and since that is going to be the case until the end of mankind, this compounding dilemma is expected to stay Hope this helps.

[@vivekjimkoshy]

@@ETMONEY thank you so much for the elaborate explanation... Much appreciated... I was also thinking the same thing you said - how can the mf prices not compound if the underlying stocks are compounding... As you have asked in the message, I am attaching the link of a popular KZbin channel regarding the same... Request your good office to kindly give him a befitting reply in his comment section... A reply from such a credible source like ETmoney will definitely enlighten the poor subscribers of these channels... kzbin.info/www/bejne/qqfQk4uXjJeFpKM The sad thing is that this is not the only channel creating such confusion among retail investors...

[@thekamalshow4581]

Dear Team ET, Please make a detailed video on REIT investment.

[@ETMONEY]

Hi, we have a video on REIT. Pls type etmoney REIT in the KZbin search bar. Thanks!

[@anandkumar4872]

Excellent video sir! Very useful

[@ETMONEY]

Happy to hear that. Thanks

[@bimalupadhyaya9875]

Excellent presentation 👏

[@ETMONEY]

Thanks a lot

[@Bharathkj]

Hello Shanker - thanks for a very informative video.. mind your emotions Quotes are told by the great Chanakya and some from vithur needhi from Mahabharata

[@ETMONEY]

Thanks for sharing this information, I didn't know that. Glad you liked the content.

[@arnabbhattacharya6579]

Great work Nath ji....please bring saurabh mukherjea of Marcellus to your show

[@ETMONEY]

Thanks. Will try

[@prakashraghunathan2685]

Thankyou for the wonderful video Sankar sir.it was a good insight.

[@ETMONEY]

Always welcome. Thanks for the appreciation

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thanks ET team for keeping information in simple way

[@ETMONEY]

Our pleasure!

[@neelamvalecha4837]

Good advice.

[@ETMONEY]

Glad it was helpful!

[@vikasnarain400]

Very thoughtful

[@ETMONEY]

Thank you!

[@ajsujit]

Sir are there any limits on how much money equity mutual funds can keep in cash at any given time? Can a fund keep say, 70% in cash during times like these when the markets are crashing? Thank you.

[@ETMONEY]

Hi. The scheme documents define the limits on how much the scheme can keep in cash, in debt, in equity etc.

[@banerjeenandan]

Wonderful as always...

[@ETMONEY]

Thank you Nandan Banerjee. Long time!

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Sir working in Singapore I want start SIP in this app so is it possible to register my NRI or NRO account

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Why ET Money is not allowed for NRIs?

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How do I speak somebody in your 'genius' project?

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10 books knowledge summed in one video

[@SanjeevKumar-mo7mi]

Pls suggest some mutual funds that can survive for 40 years in future, I want to invest in favour of my child who is now 6 year old

[@ETMONEY]

To quote (no pun intended) an old insurance saying -- "survivability is a game of probability". In our opinion, the Nifty 50 has a high probability of surviving 40 years in the future. Maybe you can explore an index fund linked to that.

[@SanjeevKumar-mo7mi]

@@ETMONEY thanks sir

[@kaustubhveer]

lol i liked it when genuine youtuber points to Shankar That way everyone thinks they are genuine

[@ETMONEY]

Haha. That's just our editors having fun.

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Why is SEBI not promoting existing ETFs and launching new ETFs? Why no leveraged ETFs in India allowed while US markets has hundreds of leveraged ETFs?

[@nabeelyahiya]

Good one❤👍

[@ETMONEY]

Thanks ✌️

[@akshaypande2493]

Hi sir I invest 3000/month in quant tax fund & 2000/month in Mirie asset tax fund age 32 . Want to invest 5000/month more for retirement plz suggest fund

[@ETMONEY]

Kindly check out options on etmoney.com or the ET Money app

[@mani.sha30]

Which Website is Best for Stock Research Please Reply me

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DO MIND YOUR EMOTIONS!! - looks like its said to me specifically :D

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Provide us a video on INDEX FUND SIP investment DEMO VIDEO.

[@KSSingh28]

I am using ET Money Genius. I am also already investing using ETMoney but without Genius. I have noticed that in Mutual funds, ET Money Genius is not investing across different Mutual fund houses. How does ETMoney ensure that all of the best Mutual funds are held by a single Mutual fund house?

[@sahilgulati450]

They use passive index fund that might be reason

[@ETMONEY]

Hi. Thanks for subscribing to Genius. Not using more AMCs is based on a limitation. You see, our algorithm is based on a combination of 6 index funds (large, mid, small, international, gold and debt). Which means, if an AMC does not have all 6, then the algorithm is inefficient. To ensure the most apt algo is used, we work with those AMCs that have all 6. Ofcourse, we are in touch with 7-8 AMCs and ensuring they file for the requisite index fund and some of them have. Over time, we can expect a lot more AMCs to hop onboard and we'll have a dozen+ options for users. We expect to have 7-8 options in this financial year itself

[@krsathyabama2390]

🙏🤗