Business & Investment

Koch: Richard Koch’s rules to help you make better investment decisions

Famous investors and authors Richard According to Koch, investors need to choose an investment approach that suits their personality and skills the most they like and that all investors consistently stick to it. Investing in the stock market.

“There are many paths to success, and anything that suits you will work. In contrast, the path to hell is well-marked and well-traveled. There are many ways to win and it’s unpredictable. There are many ways to lose, no matter which ladder you climb, you have to avoid the same snake and steer, “he wrote in the book.
Choice of sharing to run..

Richard Koch Former management consultant, entrepreneur, and prominent writer. Koch also used his investment strategy to make a fortune from several private equity investments made personally.Previously, he was a manager at

Before starting a consulting group, later a partner of Bain & Company, a management consulting company LEK consulting With Jim Lawrence and Ian Evans.

He was educated at the University of Pennsylvania and Oxford University.Koch is the author of over 20 books, including bestsellers
80/20 principle When
The Financial Times Guide for Choosing Stocks to Run.. He is also a successful investor and entrepreneur in venture companies such as Filofax, Belgo, Plymouth Gin and Betfair.

Rules to stop losing the investment battle
With years of experience in the investment industry, Koch has written specific guidelines in his book to avoid unnecessary mistakes by investors. Let’s take a look at some of these investment guidelines.

Never invest money you don’t own
Koch says investors shouldn’t borrow money to invest in stocks, even if they can.

“No matter how wealthy you are, don’t do it. It’s ruined millionaires and millionaires. Don’t ruin you. The only thing you invest in is yours. It’s money, not needed for any other purpose. An exception to this rule, “he says.

Choose short-term investments carefully
Koch says that if an investor decides to invest in a relatively short period of time, that is, within two years, there must be good reason to do so.

“The reason you’re at this time is because you want to spend that money on something else. Tuition, around the world, home deposits, etc. It’s annoying that you don’t have your starting capital when that time comes. “He says.

According to Koch, long-term stock records are excellent, but there is always the risk of a significant decline in the short term, and if there is a general market, the protection in choosing the largest, stable “safe” stocks is rare. When it declines, good stocks fall along the market.

“Overall, the stock market is not a good place for short-term” hot “money,” he says.

Do not over-diversify your portfolio
Investors shouldn’t over-diversify their portfolio, and holding more than about 15 shares rarely reduces risk, so investors shouldn’t hold too many shares, Koch said. ..

According to Koch, investors should be very familiar with the companies they are investing in, which is very difficult if they invest in a large number of companies.

“It’s better to know a few things pretty well, or one thing very well, than to know something about many things,” he says.

Another reason for the low number of shares to invest, according to Koch, is that investors will inevitably pause, solidify their thinking and consider buying and selling decisions more carefully.

“Also, you are more vigilant about monitoring them, much less likely to miss the need to sell, lighten, or increase your holdings. But how many are too many? ? It depends partially, but only partially, on the time it takes to invest. ”

Invest only if you are confident
Before investing, Koch says it’s best to be confident about the company’s medium- to long-term outlook.

“We consider stocks to be a” strong bet “and should not be invested. First, you need to look at the company and evaluate whether there is a good future for growth in the future, such as by numbers (one of the good ways to evaluate this is then whether the stock price is right or underestimated. You need to consider whether it is valued or overvalued. One of the benefits of having a small portfolio of 5-10 shares is that you don’t want to include some speculative longs. Shot. ” He says.

Don’t buy with hints
According to Koch, investors are sometimes approached by friends and acquaintances who provide “hot tips” based on rumors and information close to “inside”, but never buy stock as a result.

“For one thing, it could be inside information, in which case you and your informant could be committing a criminal offense, but even if the use of inside information is forced. , It’s not wise. You can. “Check the authenticity and importance of the data. In some cases, a person who has already purchased and will soon sell may make a deliberate attempt to “ramp” the stock. Tips are on the race course and are also there. Usually wrong. Please avoid! “He says.

Don’t follow the crowd
Investors should resist the temptation to get on the trend, as investors can probably beat the majority of investors only by following a different path, Koch said.

“Don’t stick to your investment strategy for a set period of time and don’t be put off by analysts or confused by recommendations. Of course, you have to be confident that you’re right, but unless you have important new information. You’ve made your first decision, don’t be moved, “he says.

Don’t “average down” when prices are falling
According to Koch, averaging is an unhealthy principle, meaning that in addition to holding shares, investors lower the average acquisition price at a lower price than they have already paid.

“The price when you first buy a stock is irrelevant whether you should buy it now or sell it. The only problem is the information you have now, the company has a good future and the stock is undervalued. Whether or not you have it. That’s all you need to do. Whether you buy or actually own the stock. If you can’t say “yes” to the above two points with confidence, sell it, “he says.

Koch gives the following advice if investors plan to lower the average-

1. Take great care and consider carefully before lowering the average.

2. Do not do it more than once a year.

3. Do it only if you are confident that your company’s future is good and your stock is undervalued.

4. Make sure that one stock does not exceed a quarter of the value of your portfolio (this is the absolute maximum, not the goal).

5. Do not average more than once for the same strain.

6. Do not lower the average for the past 3 days until the price stabilizes or rises and rises for at least a day.

Don’t be afraid to sell at a loss
According to Koch, some experts believe that investors should always abandon those who lose money after falling below a certain amount.

“If your share is low compared to the market as a whole (a significant qualification), you are responsible for telling why you should maintain it. There must be good reason to do so,” he says.

Learn from your experience
According to Koch, investors’ personal investment experience will probably show repetitive behavior patterns if analyzed carefully.

“If you divide your past portfolio, that is, all your stocks, into three categories organized by successful investment or otherwise, you will get a lot of insights by asking what is common to all or all. You can be part of each category of investment. The purpose is to classify the investment as winners, losers, averages (market related in all cases), look at the winners, and some common themes about them. Is to find out the type of company, how well you know them, why you bought them, or other common factor conditions. Then repeat the process for the other two categories. “He says.

Don’t make a big investment when everyone else is doing the same
Investors should not invest large amounts of money in the market if the market may have reached periodic highs, Koch said.

According to Koch, one way to avoid this is to not invest when the market is within a record high of 3%.

Balance patience and prudence
Koch states that there are two conflicting ideas and approaches that investors can undertake when making investment decisions.

According to Koch, one is a “long-term” approach, where investors rarely need to sell shares in a “good” company.

According to this approach, the secret is to find some such companies in the long run as an investor and then stick to them.

Koch says the opposite philosophy is that the market is volatile and no one has gone bankrupt by making a profit.

“Which one you prefer depends on how skilled you may be in identifying a few good companies. With the right training and encouragement to keep your eyes open. Not many people are good at doing this, “he says. To tell.

Koch, however, says that the best general position may be three-quarters for a “long-term” perspective.

Koch lists some guidelines that may help investors make better investment decisions-

1. Don’t put up with people with poor performance too much.

2. Predetermine whether the target selling price is above the cost.

3. Even if the stock reaches the target price, it will continue to hold (nervously) until the stock loses momentum.

4. If you can afford it, do not set a target price and will keep the winner for a very long time.

5. If the value of your stock doubles in a short period of time and you are considering selling, sell only half (or, if necessary, three-quarters) and lock the rest.

According to Koch, it’s possible and fun to beat the market.

“If you fail: reduce your losses. Give control of your money to others and enjoy the rest of your life. If you succeed, do something worthwhile, at least part of your wealth.” He says.

(Disclaimer: This article is based on Richard Koch’s Book the Financial Times Guide to select the stocks you want to run. )

Koch: Richard Koch’s rules to help you make better investment decisions

https://economictimes.indiatimes.com/markets/stocks/news/edited-richard-kochs-rules-to-help-you-make-better-investment-decisions/articleshow/92002252.cms Koch: Richard Koch’s rules to help you make better investment decisions

Back to top button