Whether your investment goal is retirement planning, buying a house, or financial independence; each will require a focused and dedicated investment plan. But before discussing the top 5 rules of investment, I would like to advice all long term investors to focus on companies fundamentals and tricks of evaluating their pluses and minuses. Fundamental analysis asks the investors to study the companies financial reports like balance sheet, profit and loss account and cash flow statements. These three documents tells you how strong a company is fundamentally. Here we will share top 5 tips for ensuring success in long term investment.

Rule one – Make Investment as your monthly habit.
Habit is one thing which takes time to develop. For a new investor I would suggest them to start with automatic investment. Over a period of time investment will drip deep into the system and it will become a habit. A new investor should think investment before thinking about expenditure. Do a small calculation and fix a monthly amount that can be invested each month. For more lazy investors mutual funds have made it even simpler, register for SIP (Systematic Investment Plan) and let the mutual fund companies draw a fixed money form your bank on a specified date and invest. By investing in mutual funds through SIP an investor can buy mutual fund units each month year after year. No planning & no co-ordination, this is called automatic investment.

Rule two – Investment review every 3 months.
I know, just now I have made few eyebrows to frown, but as an investor it is very important to review your investments. Quick reviews are never advised for a long term investor; but reviews every 6/8 months is essential. I am not asking your to get glued to your TV sets and watch each and every movement of stock market. But it is important to remember that all investments are done with the objective of growth, hence if your investments are not showing signs of price appreciations it is better sell them before making substantial losses. Reviews every 6/8 months will help you in deciding which stocks to hold and with which you can part away.

Rule three – Do not buy stocks at its peak.
It is a very common practice that by the time a stock becomes popular and we start buying them the price of that stock has almost reached its peak. So the rule is not to run after popular stocks, do your own research before buying. The software provided by Google Finance is an excellent way of tracking the performance of individual stocks. Ideally try to buy a stock when it is at the bottom of its market price. The price of stocks is always gyrating between its peaks and valleys. This happens due to speculation, so it is important to track the stock price and when its falls, grab it.

Rule four – Buy stocks like you are going to own it forever
Suppose you are going to buy a house for yourself. While purchasing the house the obvious filters that are used before selecting a property are design of house and locality, location of the property in the city, reputation and brand name of the developer, and finally value for money. Similarly when one buy long term stocks they must follow the following golden rules of Warren Buffett and Charlie Munge:

• Invest in business that you can understand
• Invest in business that has some intrinsic value that gives it a competitive advantage
• Invest in business that is run by a strong management
• Invest in business that has a attractive market price (margin of safety)

Rule five – Sell your present stock to buy a better value-for-money stock
People often sell stocks and mutual fund to buy liabilities. But a professional investor sells stocks to buy more valued stock. Suppose you have a stock that has reached its peak (or it has given you substantial return) then you must sell that stock and buy an undervalued stock which has more prospect of multiplying your money in futire. In short you can say sell stocks to buy more stocks, never sell your investment to buy liabilities.

You can read more here

• Best-stock-pick
• Balance sheet
• Book-value-of-shares
• How-to-buy-long-term-stocks
• Investment-options
• Investment-tips
• Inflation-and-investment
• Investing-intelligence
• Investment
• Investment objective
• Long-term-investment
• Money-management
• What is mutual fund?
• Systematic investment plan SIP
• Introduction-to-mutual-funds
• Exchange traded funds

Conclusion

1. Do long term investment as a good habit

2. Buy long term stocks like Warren Buffett

3. Sell your stocks only to buy more

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