WISE INVESTING TIPS BY IEPF

20 MANTRAS TO WISE INVESTING 

Save prudently…..Invest even more wisely

 You need to invest, otherwise your savings will depreciate in value/purchasing power. 

 However, mindless or reckless investing is hazardous to wealth; Please become an 

investor… and not a trader or a gambler.

20 Mantras to Wise Investing

Mantra 1 

Follow life-cycle investing

 You can afford to take greater risks when you are young.

 As you cross 50, you should consider gradually getting out of risk instruments. 

 By 60, you may exit risk instruments. (To not lose your capital when you have stopped 

earning new money). There are better things to do than watch the ticker on TV! 

Mantra 2 

Read carefully, and take informed decisions 

 Do due diligence; take informed decisions. 

 Read about options and processes on iepf.gov.in and visit mca.gov.in for more 

information on companies

 For example, for IPOs, read about the offer. This is difficult, with the offer documents now 

running into more than 1000 pages; abridged prospectus too is difficult to read. Yet, read you 

must, at least, the risk factors, litigations, promoters, company track record, issue objects and 

key financial data. 

Mantra 3 

Invest only in fundamentally strong companies

 Invest only in companies with strong fundamentals; these are the ones that will withstand 

market pressures, and perform well in the long term.

 Strong stocks are also liquid stocks.

 Do not go for penny stocks; you may get lured as these rise by 5-10% a day against top 

stocks that rise 5-10% in a year; you will typically enter at peak and then make losses.

 Remember, equity investments cannot be sold back to the company/promoters.

Mantra 4 

Consider investing in IPOs 

 IPOs have been a good entry point. 

 Decide whether you are investing in an IPO as an IPO or in the IPO of a company.

 During bull runs, almost all IPOs provide positive returns on the listing day. If investing in 

an IPO just because it is an IPO during a bull phase, it may be advisable to exit on the listing 

date, as you have invested without due diligence.

 However, most such investors put IPOs on a pedestal and expect them to perform 

forever. That will not happen as an IPO becomes a listed stock on the listing date, and will 

then behave like that; and only some will be outstanding. 

 If an investor does not book profit on the listing date, he is either greedy or takes a wrong 

call on the company/industry/market. He should then not fault the IPO price or blame 

regular/issuer/merchant banker. In any case, he invested in the IPO by choice; it was not 

forced upon him.

 However, if you invest in the IPO of a company, with due diligence, then do not get 

bothered by immediate post-listing performance or volatility. Remain invested as you would in 

a listed stock.

Mantra 5 

PSU IPOs deserve special attention 

 PSU IPOs are typically from companies that are profitable and have a significant track 

record and market leadership; also very little risk of fraud. 

 In almost all PSU IPOs, there is a discount for the retail investors. 

Mantra 6

Invest in mutual funds, but select the right fund and scheme 

 Mutual funds are a better vehicle for the small investors, most of whom have little skills or 

time to manage a personal portfolio. 

 The problem is that there are too many mutual funds, and there are too many schemes. 

Spend time to select the right fund manager and the right scheme/s.

 And remember, mutual funds are subject not just to market risks, and that investing in 

these does not mean guaranteed returns.

Mantra 7 

Beware of free advice 

 Too many people in the capital market offer free advice; these come through TV, print 

media, websites, emails and SMS.

 Don’t act blindly on such advice; remember free advice carries no accountability. 

Mantra 8 

Don’t get taken in by advertisements

 Advertisements are to make you feel good.

 Don't get carried away by attractive headlines, appealing visuals/messages.

 Don’t get carried away by upward arrows, big percentages and deceptive numbers.

Mantra 9 

Don't get overwhelmed by sectoral frenzies/bull runs

 Remember, you can not buy the shares of the Indian economy or of India Inc. or of a 

sector… ultimately you have to buy into a specific company.

 Also, sectoral frenzies keep changing. 

 All companies in a sector are not necessarily outstanding. Each sector will have some 

very good companies, some reasonably good companies and many bad companies.

 Be also careful about companies that change their names to reflect current sectoral 

fancy.

Mantra 10 

Look at the credentials of the entity/person

 Many scamsters are waiting to exploit your greed; targeting gullible small investors.

 Be careful about the entity seeking your money; visit watchoutinvestorts.com before 

investing.

Mantra 11 

Be careful promoters issuing shares/ warrants to themselves

 Many a times, preferential allotments to promoters are for the benefit of the promoters 

only, at the expense of minority shareholders.

Mantra 12 

”Cheap” shares are not necessarily worth buying 

 Price of a share can be low (and therefore appear cheap) because in reality the company 

is not doing well; the hype about the company/sector and comparison with prices of good 

companies may induce you.

 Worse, the price can become low because the face value has been split (over 500 

companies have split their shares); rationale given is to make shares affordable to small investors; not valid as one can buy even one share; real purpose is to make shares appear “cheap”

Mantra 13 

Beware of guaranteed returns offers

 Be extra careful before investing in any offer which promises very high returns.

 Remember the plantation companies many of which promised phenomenal returns (in 

some cases, 50% on Day 1)!

 Let not greed make you an easy prey!

Mantra 14 

Don’t borrow to invest

 Interest mounts by the day; returns don’t necessarily.

 Invest within your means.

Mantra 15

Deal only with registered intermediaries

 There are many unregistered operators in the market who will lure you with promises of 

high returns, and then vanish with your money or they will mis-sell or they will undertake 

unauthorized transactions.

 Deal with registered intermediaries, it also allows recourse to regulatory action. 

Mantra 16 

Don't over-depend upon 'comfort' factors like

 IPO Grading

 Independent Directors

 Corporate Governance Awards

 CSR Activities

Mantra 17 

Don’t take decisions based just on summary accounts

 Read through the schedules as well as qualifications and notes to the accounts.

 Check out for “Other Income” and unusual expenses

 Look out especially for entries relating to related party transactions, sundry debtors, 

subsidiaries’ accounts, cash/bank balances.

Mantra 18 

Learn to sell

 Most investors buy and then just hold on (Regrettably, most advice by experts on the 

media is also to buy or hold, rarely to sell).

 Profit is profit only when it is in your bank (and not in your register or Excel sheet).

 Don’t be greedy. Leave some profits for the buyer too. Remember, you cannot maximize 

the market’s profits. 

 Set a profit target and sell, unless you have good reasons to hold on for very long term.

Mantra 19 

If after all this, you do have a grievance...

 Seek help of www.investorhelpline.in.

The final… Mantra 20 

Be honest 

 Be honest as only then you can demand honesty and fight for your rights.