There are no rules in stock market. Position sizing is very important, stock going 5X with 5% sizing and 15-20% sizing has very different outcome on portfolio level.
1 Like
Yes, position sizing is critical for overall portfolio level performance.
It is wise to define own Custom Rules - Framework and Strategies - How to play the game? Based on own risk-appetite, time-horizon, capital and so forth.
5 Likes
PART-3/3:
5. TIME, PATIENCE & TAX
| Checklist Item | Rule |
|---|---|
| Holding horizon | 3–7 years for quality compounders; 1–3 years for tactical bets. |
| Tax planning | Account for current LTCG/STCG rules and 12.5% LTCG tax beyond ₹1.25 lakh. |
| Rebalance frequency | Review quarterly, rebalance yearly. |
| Exit discipline | Book partial profits at 3× and 5×; let winners run with trailing stops. |
| Opportunity cost check | Re-evaluate vs. other strong ideas every 6 months. |
6. SELF-CONTROL RULES (BEHAVIORAL FILTER)
| Question | Principle |
|---|---|
| Are you chasing a stock because of social media hype? | Avoid crowd psychology; verify with data. |
| Do you understand the business better than 80% of market participants? | If not, study before investing. |
| Can you sleep peacefully if it drops 40% tomorrow? | If not, you sized it wrong. |
| Do you have a written sell rule? | No plan = emotional panic. Define it. |
| Is your conviction based on intrinsic value, not price action? | Price is noise; business is signal. |
7. LONG-TERM COMPUNDING FOCUS
- Business First, Price Next — buy Businesses and Management as Partner, not tickers.
- Calm Is a Strategy — volatility ≠ risk, ignorance = risk.
- Framework over Forecast — process beats prediction.
- Step by Step — wealth builds slowly, then suddenly.
Final Readiness Question
If this stock fell 40% tomorrow and I couldn’t sell for a year —
would I still be comfortable to own the underlying Business and believe in Management ?
If yes, it might be a real candidate for a 10× journey.
If no, it’s speculation, not investing.
This is end of series for 10x investing checklist. Hope it helped you.
Thanks!
18 Likes
Happy and Prosperous Diwali to all readers.
2 Likes
The Real Test of Management
Numbers can lie. Behavior doesn’t.
In India, most listed companies are still family-run.
That makes one skill essential for every intelligent investor — learning to evaluate the management as a partner, not as a headline.
Because when promoters control everything — strategy, capital, and culture — your returns depend not just on performance but on character.
When you see ‘No dividend this years, as we want to preserve the capital’ in the company’s annual report. Then do not stop there, investigate does the Management salary/perks increasing, related part transactions, new offices, houses, and other…
Here’s what 21 years of watching companies has taught me.
1. Incentives never lie.
Ignore speeches and press releases. Follow the money.
If bonuses rise faster than profits, or the promoter’s salary grows while free cash flow shrinks, stop trusting the story.
2. Cash flow is the truth.
Profit can be decorated. Cash can’t.
When earnings look great but cash doesn’t follow, dig deeper. Something’s off.
3. Related-party deals reveal intentions.
Ask one question: Is this good for shareholders or just good for the family?
If contracts, loans, or rentals involve group firms — you’re not investing, you’re subsidizing.
4. Pledges are silent alarms.
Promoter pledging is leverage disguised as ownership.
If the stock falls, lenders sell. It’s pressure no investor can control.
5. Crisis exposes character.
Anyone can look ethical when profits rise.
Real integrity shows up during audits, recessions, or legal heat.
How they act in stress tells you who they truly are.
6. Capital allocation tells the future.
Watch what they do after raising funds.
Do they repay debt, reinvest wisely, or chase vanity projects?
Good management compounds quietly. Weak ones destroy wealth loudly.
7. Independence in the boardroom matters.
A strong board protects minority shareholders.
If independent directors quit, or never ask questions, governance is already gone.
8. Read what others skip.
The fine print in annual reports hides everything — contingent liabilities, off-book guarantees, and the truth behind “other expenses.”
Serious investors read the notes, not just the headlines.
9. Reputation is the shadow of behavior.
When employees, suppliers, or lenders whisper doubt — listen.
Markets catch up with reputation, always.
10. Builders last. Showmen fade.
The best promoters speak less and deliver more.
They think in decades, not quarters.
They don’t chase the stock price. They build the business.
Final Insight
When you buy a stock, you’re not buying a ticker.
You’re choosing a business partner in your investment journey.
So protect your capital first.
Study behavior. Respect integrity.
And remember — wealth grows peacefully only under trustworthy leadership.
18 Likes
Sir,
Compound Sales growth TTM at 13%
Compound profit growth TTM at 128%
Stock price at CAGR at -89% for 1 year
This company is undervalue or overvalued how to read this company.
PE- 70
Important question, but insufficient information. I do not rely on TTM.
Focus on -
- Business - nature, cyclical, growing, how they are making money and margins, sustainable?
- Management - Trustworthy and Capable to grow
- I typically look at PBT numbers and growth along with Revenue
- Debt levels, payment and receivable - amount , % and timeframe
- Stock Price and PE comes last in evaluation
My suggestion, study minimum last 5 years or depend on cycle, if its a cyclical business.
The stock price may or may not be efficient - hence CAGR you mentioned not significant. Avoid taking decision solely based on price.
I hope this helps.
2 Likes
Yes, Thank u sir,
Acctuly I want ask if company showing profit growth 1125%, Stock prize CAGR is 92%,return on equity 20% .
Then how much sales growth required to meet this growth continue?
The question is more theoretical. Anyone can just punch some numbers, project and try to predict.
But to say fairly need to get details as mentioned earlier.
2 Likes
I study Company name Allied blender.
Recent positive Business front triggers - integration, new capex, margin expansion through branding and advantage of UK FTA.
But pay attention to debtors days, debt levels, working capital, negative cash flow.
Marketing is pricing it higher side. Need to be cautious.
Disc: No buy/sell recommendation. Only educational purpose.
7 Likes
Now a days no one is thinking/investing in Bond Mutual funds and Cash and Asset allocation …Which iteslf show how much we have equity bias believing stocks is always best …even most of us may not tolerate 20% drawdowns…Stock market all the time may not be throw good opportunities forget about great…And In my opinion an average investor with good asset allocation can beat the index as well as great stock picker with poor asset allocation…even great investors sit with cash and bonds with waiting for wonderful opportunities instead of investing in average stocks…
3 Likes
You pointed out an interesting observation.
1 Like
A quick Financial Statements X-ray to interpret the numbers. You just need to read them right.
Balance Sheet:
- Low debt and strong liquidity mean stability.
- Cash reserves show preparedness for bad times.
Income Statement:
- Steady profit growth and improving margins reflect efficiency.
- Compare net margins with peers. Higher is better.
Cash Flow Statement:
- Positive operating cash flow means profits are real.
- Reinvestment (CAPEX) shows long-term vision.
- Growing free cash flow means wealth creation.
Importantly, read critically the notes to accounts.
Keep attention to language tonality.
8 Likes
I came from a typical middle-class family where get degrees to join a job. It’s typical mindset work for money, rather than make money work for us.
When I try to decode, there may be two reasons -
- Stock Market is Casino:
Origin of that thought may be not knowing how stock market works. Goes back to lack education.
- Stock Market is Risky:
Origin of the thought might be media headlines or people shared loss experience. It got into belief as risky. Again, its lack of education how to play the stock market game and manage the risk.
Do not adapt someone else’s belief and assume its real.
Best strategy is to upskill self and adapt what is right for you!
10 Likes
Always Demand The Margin of Safety
“The essence of investment management is the management of risks, not returns.” - Benjamin Graham.
Every market cycle has both heroes and victims.
Those who survive protect their capital first.
Your long-term key to succeed in investing is always demand Margin-of-Safety.
I learned it the hard way. Still make mistakes once in a while, typically when I get into crowd mentality.
Hence, investing for me is About Discovering Myself, Disciplining Myself, and Demanding to Perform Better each Day.
5 Likes
A quick note -
Healthy companies usually have:
- Positive Operating Cash Flow,
- Moderate or declining Debt,
- Steady Equity growth, and
- Improving ROE (Return on Equity).
4 Likes
Value Investing:
Price = Emotion; Value = Logic. Price reflects crowd psychology. Value reflects business strength.
Markets overreact. Fear and greed push prices far above or below true worth.
Real wealth comes from patience. You profit only when the business performs, not when prices dance.
Your edge is understanding. Reading balance sheets and business models beats guessing the next trend.
1 Like