Advice to a first time investor

Hello all wise and learned people :slightly_smiling:

I would like to seek your advice as a first time investor about the current market situation.

Some say its a good time to invest when the prices are low and some think it is good to wait and watch and preserve the capital.

I would like to know your opinion if any on this.


Hello Rahul,

Every investor/trader has a different set of goals. One’s strategy should be complementary to his/her goals.

My advice to you is to create a system for yourself and follow it meticulously.

Read good books on stock investing, they will enable you in stock picking. Some of the top beginner books are -

One up on wall street by Peter Lynch,

Five rules for successful stock investing by Pat Dorsey,

The little book that beats the stock market by Joel Greenblatt.

The Dhandho Investor by Mohnish Pabrai

Remember, these books are a starting point and you’ll like to read more to sharpen your skills further.

Also, whatever you buy, buy with high Margin of safety. If you buy right, you are most likely on the right path to become a successful investor.

For the current market situation (or any period), go SIP mode and you are less likely to go wrong.



Start small relative to your net worth and learn tricks by making and losing money. That’s the best teacher and gradually increase size as you gain confidence.


Thanks @NikhilJain and @sumi00 . I guess hard work and learning things on the way is the only answer.

Appreciate your replies.

I think nikhil jain has given the perfect advice to a newbie investor.

Its best to invest in educating oneself. Two main ingredients of investing are stock selection and capital allocation. Peter Lynch’s book One up will show you the ART side of stock picking and zero in on good companies worth researching whereas Pat Dorsey’s book teaches the SCIENCE part of investment esp how to analyse a company in depth.

Regarding markets, and market levels, there will be a variety of views on where the markets are headed. For the investor it makes sense to stop bothering what is not in his control. What is definitely in his control is selecting good companies and investing in them and keep monitoring them.


Might be worth adding here - go by KISS principle. To start off with, you may want to identify at max 2 or 3 companies across 2 sectors (for example, Pharma & Banking or NBFC’S) for the initial 1-2 years and depending on the growth & growth prospects of these companies/sector, you may want to increase or decrease your allocation.

This way, you will be able to gain better insights into the working of these sectors and keep a close watch on these 2-3 companies, their managements etc and educate yourself. Upon gaining confidence which I expect would take you a year or two, and as long as your portfolio size remains low, you may want to stick to this strategy.

Once you cross a sizeable PF figure (which may be for example >10 L in your mind), you may want to relook at additions in terms of sectors and/or companies. This way, your limited resource (i.e money & time) gets a chance to concentrate & build with time. After all, one need not have to make money in every sector or listed company to get wealthy. All the best in your journey!

I am just a kid in this block, learning from the insights senior share here. What made me come here is the idea of compounding which I took away after reading Snow Ball, the Biography of Warren Buffett.

Inspiration goes a long way, and I got inspired by people like Warren Buffett, Charlie Munger. Time invested on Books is like money invested in good companies, always search for new knowledge. The book Seeking Wisdom by Peter Bevlin, which has condensed the insights of Buffett and Munger in a very readable framework. Give it a try.

1 Like

Thanks Hitesh Bhai. Your words are music to the ears of a novice like me.

@concoction here is another good advice. VP has some pretty amazing folks like @hitesh2710. Read as many posts of him, Donald and other few seniors as possible. You’ll get knowledge of immense value.

1 Like

There are two sides to investing. The analytical side and the temperamental side. While the former you can learn by reading, the latter has to be honed through actually putting money to work. Both of these are important and in isolation neither is sufficient. Whichever approach you take, I would suggest you try to balance both of these aspects.


I have joined this forum recently and I am learning something everyday. I would like to know how to shortlist companies for further analysis ? Should I first research on the valuation part using screeners or we should study business part first and focus on valuations later.

Investing is an art. And like any art you need to learn the fundamentals and then practice, practice and practice. Like any art you will not see the results quickly. There will be plateau as you learn. You have to persist through those plateaus. Like any art you need to correctly identify that you need to master…the basic elements. Then you engage in something called deliberate practice which is entering in discomfort zone every day to learn something new. Mere mindless repetition is not going to help you reach your goals. While you are progressing well as student apprentice of this craft you also need to start asserting your own style of investing based on your temperament and value system. For that you may experiment with few styles and zero on one or two most suitable. You may also mix and match different styles. The ultimately you will reach a stage when you look at data you quickly get the big picture and the most relevant facts just pop out as if 3 D movie. Even then the journey is not over. Investing involves numbers, accountancy, human psychology, managing emotions, strategies etc. I have few relatives who are still investing in their 90s and they still cannot figure it out all. That is the source of their fascination for this wonderful craft else why would they spend so much energy at their twilight hours? The journey never ends…


No, please don’t start from business part without knowing what you are or what you want, sounds strange isn’t it? I hope you will find factually to understand what you like, in other words we call also as circle of competence, apologies for repeating if you are already aware of.

Circle of competence- it basically says put money where you understand meaning if you dont understand business then put no money. I do this every year since last 15-16 years, not sure it will help you:

  • write down all subjects you are passionate into
  • write down all subjects you are good at
  • write down all subjects where you make money or spend money
    The common subjects between three are the ones your circle of competence. I have adopted this from a book by “Good to great by Jim Collins”.

Map your circle of competence with sectors given in BSE, you will get this easily in BSE website. The common intersection will reduce the universe of your companies drastically.

Please do this if you haven’t…

Next to fish from universe there are several ways, but my opinion focus on value related numbers…understanding a business for bad stock will waste a lot of time.

The best valuation factors are not PE, PB etc. again to my view. What I do:

  1. Prepare excel file and track consistent growth for Revenue, EPS, Net Margin, Return on Equity and Return on Invested Capital. All five should be growing consistently over last ten years. You can get 10 years data from morningstar india website. This would give some solid indication about fundamental nature of business.
  2. For those stocks which pass through “1” put down the book value of company (book value multiplied by number of shares), net profit after tax (adjust other income net of taxes…e.g. Net Profit after Tax minus other income minus adjust 35% for corporate tax). Include market cap in another column.

Basic check is compare Book value, market cap and adjusted earnings to get sniff something on valuation front. What should we check:

  • if we buy the entire company (that is market cap) how much earnings we are getting. E.g. 200 Cr earnings and 2000 Cr MCAP means rate of return is 10%.Choose the ones with higher return, I use a cut off for 15%.
  • Calculate earnings on book value (adjusted earnings by book value of earnings) to see what fundamental return its throwing. With a healthy earning rate you can start as well.

But this is one of many methods for “start only”. Hope this helps.

1 Like

I hope I can take the liberty to link here one of my earlier posts, this may help you, particularly the list of books that once can start reading.

Thanks for all the replies. Really insightful.

Though I have begun my journey into value investing by reading and understand and re-reading. It is still a slow process. My family and job take up my time and I cannot proceed at the pace I wish to learn at.

So what if I want to invest now?! please don’t ask me to consider mutual funds. I’m wary of them and think/hope it is relatively easy to do better than the average MF.

Are there investors who for a fee would help build your portfolio? What should I consider if I have to zero in on someone to help manage my investment.

Again, appreciate all the replies.

Start with mf it’s more difficult to lose money with mf. Beating mf results is not that easy with decent size of capital

1 Like

I am a novice investor. My exposure to capital markets, albeit short, has definitely taught me some lessons. I erred, learned from those mistakes and have tried to construct a system, a strategy that works for me.
a) Nimbleness
Being nimble, agile has helped me restrict my losses on a lot of positions I had initiated. When realisation dawns that some improper investment decisions have been taken, it pays to not prolong correcting the mistake. Often, it may mean booking a loss. Book the loss. Move on.
Booking losses is never easy. It hurts. But, it’s a bitter potion. It vastly improves future actions if lessons are learned.

b) Interaction with fellow investors
I began my investing journey by reading some of the popular investment books. I was foolish to think that I had acquired the requisite skills to participate in the stock market. Also, I had developed a superiority complex. I was ignorant. I was arrogant. I was an empty vessel that made too much noise. Then, by the stroke of luck, I got the opportunity to meet some investors, not much older than me. My arrogance melted. I understood that I was nothing but a speck of dust. I stayed in touch with the group of investors. I learned a lot from them and often cloned their investment decisions. It worked well for me. It serves well to be open to the idea that the beliefs we hold may be wrong. That allows us to grow and become accepting of others’ perspective.

c) Involvement in other activities
When I began, I was addicted to the stock market. I’d check stock prices every 10 minutes. I was passionate. But, anything in excess is detrimental. Eventually, I was tired.
Hence, its important to participate in activities very different from investing. It’ll ensure our health - Physically and mentally.
It could be reading, running, music,intellectually stimulating discussions. Absolutely anything.
After all, it’s a healthy mind and a healthy body that’ll ensure healthy returns from the market.

d) Shed the urge to compare
It’s difficult to resist the temptation to compare our stock returns, performance with that of your acquaintances. And, our underperformance often causes aggravation. I compared and I still compare. I’m trying to get rid of this vice.
Comparison makes us unhappy,envious. These aren’t very healthy emotions to harbour. It directly or indirectly will have a bearing on our investing performance. If you do well, excellent. If you don’t, its alright. Someday, you’ll do well. Don’t fall in the vicious circle of loving suffering and self pity. Stay positive and give it your best.

e) Seek help
For most people, direct equities may not be the right strategy to adopt. Not everyone can do everything. But, if there’s the desire to be the manager of our funds there’s no harm, shame in seeking support from financial services firms. They exist for precisely this purpose. Seek help. Sharpen your returns.