A balanced diet can improve your thinking

WASHINGTON: A balanced diet and regular exercise not only protects one from heart disease and cancer, it also helps insure the brain against mental disorders. “Food is like a pharmaceutical compound that affects the brain,” said Fernando Gsmez-Pinilla, University of California LA and professor of neurosurgery and physiological science. “Diet, exercise and sleep have the potential to alter our brain health and mental function, said Gomez-Pinilla. He has spent years studying the effect on food, exercise and sleep on the brain. “This raises the exciting possibility that changes in diet are a viable strategy for enhancing cognitive abilities, protecting the brain from damage and counteracting the effects of ageing.” Gsmez-Pinilla who analysed more than 160 studies about food’s affect on the brain, said that Omega-3 fatty acids — found in salmon, walnuts and kiwi fruit — provide many benefits, helping fight mental disorders like depression and mood disorders, schizophrenia, and dementia. “Dietary deficiency of omega-3 fatty acids in humans has been associated with increased risk of several mental disorders, including attention-deficit disorder, dyslexia, dementia, depression, bipolar disorder and schizophrenia,” he said, reports Eurekalert. Children who had increased amounts of omega-3 fatty acids performed better in school, in reading and in spelling and had fewer behavioural problems, he said. In an Australian study, 396 children aged between six and 12 years, who were given a drink with omega-3 fatty acids and other nutrients showed higher scores on tests measuring verbal intelligence and learning and memory after six months and one year than a control group of students. This study was also conducted with 394 children in Indonesia. The results showed higher test scores for boys and girls in Australia, but only for girls in Indonesia. These findings have been published in the July issue of the journal Nature Reviews Neuroscience.

Is India a superpower of poverty?

Much has been written on poverty, especially in India. Much more will be written in future. Clearly, looking at the hundreds of millions living in poverty in this country, and the depth and extent of poverty, is not the title "superpower of poverty" shameful but appropriate for India? It overrides all positives and other 'good news.' Reports of super-rich Indians add fuel to the fire. Forecasts by analysts that poverty will decline steadily — ; and has declined — can be no consolation to those living in poverty or to India as a nation. How can we embrace a new paradigm of development? Is it too complex a challenge? Is it possible to add value to the lives of the poor? Here are 12 issues to focus on to help the required change to happen and to do so with speed. First, it is not only about government schemes, allocation of funds, NREGA, etc. By and large, they are usually slow, full of leakages. The delivery systems of the Central and State governments are usually weak and inadequate. In fact, T.N. Ninan's approach suggesting that India scrap all schemes and, instead, pay Rs. 30,000 (to the intended group) merits consideration and action. This could be simple, quick and efficient and, perhaps, leak proof. But it has to go beyond giving cash. Mentors, who are volunteers, should help the poor use the money productively. This, too, can be done to support empowerment beyond money.Secondly, economic growth at 7, 8 and 9 per cent per annum has made a real difference. Across the country, new jobs have been created. People from tier 3 and 4 towns and villages have jobs in factories, shops, offices and malls. Sustaining 9 per cent growth and going beyond 10 per cent should be given the highest priority to address poverty. The decline in growth is bad news. Reversing the decline in the manufacturing sector is critical. Rapid investment in infrastructure is crucial. India can grow at 12 per cent GDP per annum to truly transform the employment and poverty scenario. The need is to focus and stretch, especially those sectors holding back high growth, e.g. mining and power. Thirdly, India has already made a mark with innovation and development of low-priced products and services. C.K. Prahalad's thesis, "the fortune at the bottom of the pyramid," is a reality, be it in health, insurance, IT services, the nano or other areas. India has creativity and talent. A simple encouragement from the government could be a five-year tax holiday where real innovation has taken place. It will provide a great fillip to innovation. The government will really lose nothing because these products/services were non-existent and the exchequer gains indirectly. The opponents will argue about misuse but innovation, especially in low-price products, will have a positive impact.

Buying is more important than Selling!

Most investors tend to crib when the market is going down. I find this very strange, because most of the money that I make is made when the markets go down and I buy.When I buy a stock cheap, I am keeping my downside limited and am leaving more room for the upside. One of the most important things about getting substantial returns on your investments is not really selling but buying.Several people pay undue importance on selling at the right time, but fail to give importance to buying. For example let us say you invested in Unitech in 2002. Would that decision have more value or would the decision to sell in 2007 or 2008 have more value? Yes, there might be some minor differences in the stock price between 2007 and 2008, but most of the money would have been made when you bought into Unitech after finding out about their huge land bank which was relatively unknown at that time. Every Rs 10,000 put at that time would be worth over Rs 1 crore today.If you have done your buying wisely, selling would not really be something to think about. Warren Buffett had once said that investing is simple but not easy. No matter how much people are told about buying when markets are going down, they still will continue to panic. No matter how much people are told to stay balanced and not rejoice because markets are going up, they will still continue to rejoice unnecessarily.For example a few days ago when the markets were going down, I bought more into a small company which will benefit from India’s huge infrastructure demand. It is much cheaper than what it was say two weeks ago and that is why I bought into it more. I bought into it simply because of fundamentals and the huge business opportunity available. Now the irony is that when such companies are available at cheap prices, very few people will look at them. But when after a few years they quote at prices several times of today, people will rush behind them and say things like Rakesh Jhunjhunwala holds it, let us buy into it. They forget that Rakesh Jhunjhunwala bought the stock much cheaper than what they are buying it at. Once again does it mean that since I bought it today, it won’t go down tomorrow? Of course not, it can certainly go down or go up in terms of its stock price, but what we can do is try to make sure that we are investing in a company whose fundamentals we understand.Over the years after making mistakes I have learnt a few basic principles which even though might sound simple are not always easy. One of them is that it is best to buy when every analyst and reporter is talking about doom.We do have challenging time with crude oil moving up as well as inflation all across the world charging ahead. The Indian rupee has depreciated quite fast and lots of our foreign exchange is being used to fund the rising oil bill. But the world has been through more difficult phases and this too shall pass.A few sectors will surely be affected by this, however there are several sectors which don’t have a lot to do with all this. Why not look at such sectors? Domestic consumption is rising and I personally like companies which can benefit from domestic growth.Happy buying and wealth creation!

BY indiainsured - Posted on 01 July 2008

NRIs can invest in Indian markets

Anon-resident Indian (NRI) is a citizen or person of Indian origin (PIO) who resides outside India. Under the Foreign Exchange Management Act 1999 (FEMA), a person who is not a 'person resident in India' , as defined under Section 2(V) of the Act is considered as a 'person resident outside India'. A PIO could be a citizen of any country but should have held an Indian passport, his parents or grandparents should have been citizens of India by virtue of the Constitution of India or the Citizenship Act 1955, he should be the spouse of an Indian citizen, or should be a person referred to in subclause (a) or (b). Investments by PIO in domestic securities are treated in the same as investments by NRIs and require the same approvals, while being eligible for the same exemptions. A NRI or PIO can open a demat account with any depository participant (DP). He needs to specify the type (NRI or resident) and the sub-type (repatriable or non-repatriable ) in the account opening form collected from the DP. No permission is required from the Reserve Bank of India (RBI) to open a demat account. However, credits and debits from the demat account may require general or specific permissions as the case may be, from designated banks. No special permission is required by an NRI for dematerialiation or rematerialisation of securities. Holding securities in the demat form only constitutes change in form and does not need any special permission . However, only those physical securities which are NR-repatriable and NRnon-repatriable can be dematerialised in the corresponding depository accounts. The securities purchased under repatriable and non-repatriable category cannot be held in a single demat account. An NRI must open separate demat accounts for these securities. According to Section 6(5) of FEMA, a NRI can continue to hold the securities which he had purchased as a resident Indian, even after he has become a NRI, on a non-repatriable basis. In case a NRI becomes a resident in India, he will be required to change the status of his holding. It is the responsibility of the NRI to convey the change of status to the designated bank branch, through which he had made the investments in the portfolio investment scheme, and to the DP with whom he has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to the resident account, and then the NRI demat account should be closed. NRIs are also permitted to make direct investments in shares and debentures of domestic companies and units of mutual fund. They are also permitted to make portfolio investments - purchase of shares and debentures of domestic companies through the stock exchange. These facilities are granted both on repatriation and non-repatriation basis. Further, NRIs can purchase securities by subscribing to public issues. The issuing company is required to issue shares to NRIs on the basis of specific or general permissions from the government or the RBI. Therefore, individual NRIs need not obtain any permission . NRIs do not require any permission to receive bonus or rights shares too. They can purchase existing shares and debentures of domestic companies by private arrangement. The RBI permits NRIs to purchase shares and debentures of existing domestic companies on non-repatriation basis. An undertaking about non-repatriation is to be given. NRIs can also obtain loans abroad against the collateral of shares or debentures of domestic companies . The authorised dealers have been permitted to grant loans and overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares or debentures held by them, provided the securities concerned were acquired on repatriation basis. The purchase and sale of shares by NRIs requires permission from designated banks. Therefore, a DP may ask for a copy of the permission from the designated bank before executing a debit (sale) transaction. They may not enable standing instructions for automatic credit unless a copy of the permission from the designated bank for sale or purchase is given.

Working on a computer? Watch your back

Most of us do it. Some do not pause once, others take breaks. Yes, all of us spend quite a good time on the computer. But have you wondered being glued to the monitor for hours at length could actually be dangerous for your back? Of course, computers have become a necessity in everyone’s life. With increasing broadband penetration and last mile connectivity on the rise, the number of computer users are expected to grow at a fast rate in the coming years. But mind you, increased number of hours spent in front of the computer also brings with it a number of potential health hazards. People affected by health disorders such as occupational overuse syndrome (OOS) and carpal tunnel syndrome (CTS) are on an all-time rise. OOS, also known as repetition strain injury (RSI), is a collective term for a range of conditions, characterised by discomfort or persistent pain in muscles, tendons and other soft tissues, with or without physical manifestations. CTS occurs when the median nerve, which runs from the forearm into the hand, becomes pressed or squeezed at the wrist. Approximately 3-5% of the population has CST due to repetition of motion needed for computing tasks. It causes numbness, tingling, pain and weakness in the thumb, index, middle and ring fingers. A wrong posture at work may also cause pain in the neck and back, sleeplessness, irritability and anxiety. The serious problems could include spondylosis and severe back pain. A friend working with a data entry firm recently faced it — and quite seriously. Used to chomping furiously at the keyboard for long hours, he complained of low-back pain the other day and had to see a doctor. He was diagnosed as suffering from repetitive stress injuries that come from poor posture and typing habits. He was advised rest and educated on how these injuries could be easily avoided.

Here’s a dekko at the severity of the problem: Up to 15-25% of the workforce is affected by posture and back-related problems at any given point in time across the globe. According to a study, over 500 million man hours are lost every year in the US alone due to posture and ergonomics problems. Clearly, there are huge economic implications which practically get unnoticed in a country like India. Expert say poor awareness among the people and lack of knowledge among doctors about industrial health lead to such problems. Says Dr S K S Marya, director, orthopaedics, Max Healthcare, New Delhi: "Simply put, ergonomics is all about postures and their relationship with health. The science of ergonomics studies how people interact with their environment, and then figures out ways to make these interactions more efficient and safe. That means designing backpacks to put less stress on the back, or arranging computer monitors so that you don’t have to strain to see the monitor." Experts feel workplaces should pay more attention to chair design and ergonomics so as to avoid complications. “The spine should always have contact with the chair and the angle of head should be neutral. That’s the only way you can get away from problems like cervical spondylosis while doing repetitive work for long hours. In fact, people spend 8-14 hours in front of a computer everyday. If you do something wrong for prolonged hours, complications will arise,” Dr Marya adds. In fact, ergonomics should be an essential part of any office design as this has a direct bearing on the health of the workers. Doctors say that if you have to do a repetitive work for long hours, like sitting in front of the computer, then you must get up for three-four minutes every hour and stretch your muscles because they can hold the spine for some time only. Centre of gravity is another important factor which ergonomics should look into. Experts say that practising ergonomists must have a broad understanding of the full scope of the discipline. That is, ergonomics promotes a holistic approach in which considerations of physical, cognitive, social, organisational, environmental and other relevant factors are taken into account. One of the important goals of ergonomics is to design jobs to fit people. This means taking account of differences such as size, strength and ability to handle information for a wide range of users. Well, it’s time to sit up and take note

Tax deduction on payment for housing

Apart from the deduction of interest on housing loans, the Income Tax Act also permits some deduction to assessees. Under the Act, a deduction is allowed on contributions made for specified purposes. A percentage of the total contributions made is allowed as a deduction. The deduction is allowed only to individuals and Hindu Undivided Families. Other categories of assessees are not entitled to this benefit. The rebate is for payments made for purchase or construction of a house. Accordingly, any sum paid during a previous year by the assessee for purchase or construction of a house (the income from which is chargeable to tax under the head 'Income from house property' ) is eligible for the deduction. Here are some payments that qualify for deduction: Finance schemes Any instalment or part payment of an amount due under any self-financing scheme, or any scheme of any development authority, housing board or any other authority which is engaged in the construction and sale of houses on ownership basis. Amount paid to society Any instalment or part payment of an amount due to any company of which the assessee is a shareholder, or to any co-operative society of which the assessee is a member , towards the cost of a house allotted to him. Payment to government Repayment of an amount borrowed from the Central or State Government, a bank, Life Insurance Corporation, or any public company formed and registered in India with the main business of finance for houses. The amount allowed for deduction includes stamp duty, registration fee and other expenses for the purpose of transfer of the house to the assessee. Payments not eligible for this rebate: Any amount paid by a shareholder of a company or a member of a co-operative society, to become a shareholder or member, towards admission fee, cost of shares or initial deposit Amount spent on any additions , alterations, renovations or repairs, which are carried out after the house or any part of it has either been occupied by the assessee or any other person on his behalf, or has been let-out . In case the assessee transfers the house before the expiry of five years from the end of the financial year in which possession is obtained by him, no deduction will be allowed. Further, the aggregate amount of the deductions allowed in the prior years will be deemed to be tax payable by the assessee in the relevant previous year.

Best Judgment Assessment in Service Tax

Prior to omission by Finance Act, 2004 (w.e.f. 10.9.2004) the provision relating to Best Judgment Assessment in section 72 read as under -
"If
(a) [any person who fails to make the return under section 70, or]
(b) any person having made a return fails [to comply with the provisions of section 71], or
(c) the [Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise] is not satisfied with the correctness or the completeness of the accounts of the assessee,
the [Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise], after taking into account all the relevant material which he has gathered, shall, by an order in writing, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment."
On any one or more defaults, the Assistant or Deputy Commissioner of Central Excise, after taking into account all relevant material which he might have gathered, shall make a best judgment assessment and determine the sum payable by or refundable to the assessee on the basis of such best judgment assessment. The Assessing Officer should act honestly and he does not have any absolute arbitrary authority. After amendment made by Finance Act, 2001, the assessment was required to be done by Assistant/Deputy Commissioner of Central Excise and not the Central Excise Officer.
If a person failed to comply with section 70 for filing of return or did not complied with notices issued under section 71 or Assistant/Deputy Commissioner was not satisfied with the correctness of accounts of the assessee, the assessing officer could proceed with making an assessment by a order in writing to the best of his judgment and on the basis of material available with him.
After the enactment of Finance Act, 2001, non-compliance with any of the provisions of section 71 relating to verification of tax assessment by assessee attracted the provisions of section 72. Section 72 was omitted by Finance Act, 2004 w.e.f. 10.9.2004 and has now been reintroduced after a gap of four years with modifications by Finance Act,2008 w.e.f. 10.5.2008
What is meant by best judgment assessment
Best judgment assessment is not by way of penalty for non-compliance and it cannot be made capriciously in utter disregard to the material on record - Jotram Sher Singh v. CIT (1934) 2 ITR 129 (All).
In Sri Ghauker Khandsari Sugar Mills v. CIT (1992) 193 ITR 699 (Karnataka), it was held that best judgment assessment to be based on a fair and proper estimate of the income of the assessee and the inference to be drawn from the available material should be proper. It should be based on proper enquiry and data, though the enquiry may be summary. The assessment should also be on the basis of the material discovered by the assessing authority. In ITO v. Jitender Mehra(1995) 53 ITR 396 (Delhi ITAT), it was held that on expartie assessment under section 144 of the Income Tax Act must conform to the rules of justice, equity and good conscience and it can not be arbitrary and capricious.
This provision is akin to the similar provision of Income Tax Act (Section 144). There are no provisions for best judgment assessment under Central Excise Act, 1944. It has been held that provisions of section 144 of Income Tax Act, 1961 are mandatory - CIT v. Segu Butchaiah Shetty (1970) 77 ITR 539 (SC). There can be no best judgment assessment where the mistakes are insignificant - CIT v. Padma Chand Ram Gopal (1970) 76 ITR 719 (SC). The order should not only speak about the total income of the assessee but also of the tax payable.
In a best judgment assessment the assessing officer should really make the assessment on the basis of his best judgment i.e. he must not act dishonestly or vindictively or capriciously. There are two types of judgment assessment:
- Compulsory best judgment assessment made by the assessing officer in cases of non-co-operation on the part of the assessee or when the assessee is in default as regards supplying informations.
- Discretionary best judgment assessment is doen even in cases where the assessing officer is not satisfied about the correctness or the completeness of the accounts of the assessee or where no method of accounting has been regularly and consistently employed by the assessee.
The word 'fails' should be interpreted to mean 'omit' or 'does not'. The scope of word 'fails' is large enough to include any act of inevitable necessity.
Following judicial pronouncements on best judgment assessment (income tax) are noteworthy -
- The assessments made on the basis of the assessee's accounts and those made on 'best judgment' basis are totally different types of assessments, The distinction between 'best judgment assessment' and assessment based on accounts submitted by an assessee must be borne in mind. Sometimes there may be innocent or trivial mistakes in the accounts maintained by assessee. There may be even certain unintended or unimportant omissions in those accounts; but yet the accounts may be accepted as genuine and substantially correct. In such case, assessments are made on basis of accounts maintained, even though the assessing officer may add back to the accounts price of items that might have been omitted to be included in the accounts. In such case, the assessment made is not a 'best judgment' assessment. It is primarily made on the basis of accounts to evade taxes, it is not possible for the Assessing Officer to find out precisely the turnover suppressed. He can only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things, the estimate made may be over-estimate or an under-estimate. But, that is no ground of interfering with his 'best judgment'. -.-.-.-.-.-.-..
If the estimate made by assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima Facie, the assessing authority is the best judge of the situation. The 'best judgment' is of the Assessing Officer and of nobody else.-.-.-.-.-. High Court cannot substitute its best judgment for that of Assessing Officer -.-.-.-.-Court will have to first see whether accounts maintained by assessee were rightly rejected as unreliable - CST v. H.M. Esufali H.M. Abdulai [1973] 90 ITR 271 (SC).
- In making a best judgment assessment, the Assessing Officer does not possess absolute arbitrary authority to assess any figure he likes. Although he is not bound by strict judicial principles, he should be guided by rules of justice, equity and good conscience - CIT v. Ranicherra Tea Co. Ltd. [1994] 207 ITR 979 (Calcutta HC).
- The mere fact that the material placed by the assessee before the assessing officer is unreliable does not empower the officer to make an arbitrary order. The power to make a best judgment assessment is not an arbitrary power - State of Orissa v. Maharaja Shri B.P. Singh Deo [1970] 76 ITR 690 (SC).
- The assessee will have to be given an opportunity of being heard and a right to question the correctness or the relevancy of the materials on the basis of which the ITO proposes to make the best judgment assessment - Dhanalakshmi Pictures v. CIT [1983] 144 ITR 452 (Mad.); T.C.N. Menon v. ITO [1974] 96 ITR 148 (Kerala H C).
- While making a best judgment assessment on the basis of comparable cases, the assessee must be apprised of those cases and given an opportunity to have his say in the matter - K. Baliah v. CIT [1965] 56 ITR 182 (Mysore H C).
- The authority making a best judgment assessment must make an honest and fair estimate of the income of the assessee and though arbitrariness cannot be avoided in such an estimate, the same must not be capricious but should have a reasonable
- nexus to the available material and the circumstances of the case - Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524 (SC).
- The officer making a best judgment assessment must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for the purpose he must be able to take into consideration local knowledge and repute in regard to the assessee's circumstances and his own knowledge of previous returns/assessments of the assessee and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guesswork in the matter, it must be honest guesswork - CIT v. Laxminarain Badridas [1937] 5 ITR 170 (PC).
- Though best judgment assessment is an estimate and involves guess work, the estimate must relate to some evidence or material and must be something more than mere suspicion - Raghubar Mandal v. State of Bihar - (1957) 8 STC 770 (SC) = AIR 1957 SC 810. Even a best judgment assessment must be made reasonably and not suiormises - Kathyaini Hotels v. ACCT (2004) 135 STC 77 (SC)
- There is no doubt that authorities should try to make an honest and fair estimate of the income even in best judgment assessment and should not act arbitrarily, there is always a certain degree of guess work in best judgment assessment. If assessee did not maintain proper books of account, he himself has to be blamed for such an assessment - Kachwala Gems v. JCIT (2007) 158 Taxman 71 (SC).
- Where there was no finding by the ITO that there had been any non-compliance with any of the notices mentioned in sub-clauses (a), (b) and (c) of section 144, the order of best judgment assessment should be struck down, even if there was valid service of notice under section 131 and there had been non-compliance with the terms of such notice - Mohini Debi Malpani v. ITO [1970] 77 ITR 674 (Calcutta H C).
- Mere non-production of books, without proof of the existence of things not produced, would not fall within the mischief of section 144 - J.M. Sheth v. CIT [1965] 56 ITR 293 (Madras H C).
- Though there is an element of guesswork in a 'best judgment assessment', it should not be a wild one, but should have a reasonable nexus to the available material and the circumstances of each case. Though the section provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard to the available material - State of Kerala v. C. Velukutty [1966] 60 ITR 239 (SC).
- Where the accounts were not audited by the chartered accountant for frivolous reasons, appellant could not be held responsible. There is neither default nor failure to comply with the directions issued so as to attract the provisions of best judgment assessment u/s 144 of Income Tax Act, 1961 - Swadeshi Polytex Ltd. v. ITO (1983) 144 ITR 171 (SC),
These judgments bring about the following inferences -
- Power to do best judgment assessment should not be used arbitrarily.
- Best judgment assessment is different from a regular assessment.
- Opportunity of being heard must be given to the assessee.
- Principles of justice, equity and good conscience must be followed by the assessing officer.
- Assessing Officer doing best judgment assessment should make honest and fair estimates.
- Non production of books or non audit by CA are not valid grounds for best judgment assessment.
Best judgment assessment done on comparable basis should be discussed with assessee.

Golden Quote

“Friends and Medicine play the same role in our life .both care for us in pain But ………..The only difference is that friendship does not have an expiry date……!”

24 Buffet Ideas to win 365 battles every year

24 ideas Buffet has followed from day one.Your reviewer enumerates below these twenty-four ideas with his comments for your ready reference:
1. Choose Simplicity over Complexity

When investing, keep it simple. Do what’s easy and obvious.If you don’t understand a business, don’t buy it.
2. Make Your Own Investment Decisions

Don’t listen to the brokers, the analysts, or the pundits. Figure it out for yourself.Become a value investor. It’s proven to be a very rewarding technique over the long term.
3. Maintain Proper Temperament Let other people overreact to the market.

To succeed in the market, you need only ordinary intelligence. But in addition, you need the kind of temperament to help you ride out the storms and stick to your long-term plans. If you can stay cool while those around you are panicking, you can surely prevail.
4. Be PatientThink 10 years, rather than 10 minutes

Don’t dwell on the price of stocks. Instead, study the underlying business, its earnings capacity and its future. If the question is, “How long will you wait?” – “If we’re in the right place, we’ll wait indefinitely” says Buffet.
5. Buy Business, Not Stocks

Once you get into the right business, you can let everyone else worry about the stock market.Business performance is the key to picking stocks. Study the long-term track record of any company that is onyour buy list. Buffet looks for following five main things before investing in a company.(i) Business he can understand(ii) Companies with favorable long-term prospects(iii) Business operated by honest and competent people(iv) Businesses priced very attractively(v) Business with free cash flowDon’t think about “stock in the short term.” Think about “business in the long term”.
6. Look for a Company that is a Franchise

Some businesses are “franchises”. Franchise generates free cash flows.
7. Buy Low-Tech, Not High-Tech

Successful investing is rarely a gee-whiz activity. It’s less often about rockets and lasers and more often about bricks, carpets, paint, shaving blades and insulation.Do not be tempted by get-rich-quick deals involving relatively complex companies (e.g., high-tech companies).They are the most unpredictable in the long run. Look for the absence of change. Look for the business whose only change in the future will be doing more business, e.g Gillette Blades.
8. Concentrate Your Stock Investments

A the “Noah’s Ark” style of investing – that is, a little of this, a little of that. Better to have a smaller number of investments with more of your money in each.Portfolio concentration – the opposite of diversification – also has the power to focus the mind. If you’re putting your eggs in only a few baskets, you’re far less likely to make investments on impulse or emotion

9. Practice Inactivity, Not Hyperactivity

There are times when doing nothing is a sign of investing brilliance.Be a decade’s trader, not a day trader.
10. Don’t Look at the TickerTickers are all about prices.

Investing is about a lot more than prices. It is about value. It is about wealth.Abstain from looking at share prices every day. Study the playing field and not the scoreboard. Know the value of something rather than the price of everything.
9. Practice Inactivity, Not Hyperactivity

There are times when doing nothing is a sign of investing brilliance.Be a decade’s trader, not a day trader.
10. Don’t Look at the Ticker

Tickers are all about prices. Investing is about a lot more than prices. It is about value. It is about wealth.Abstain from looking at share prices every day. Study the playing field and not the scoreboard. Know the value of something rather than the price of everything.
11. View Market Downturns

as Buying OpportunitiesMarket downturns aren’t body blows; they are buying opportunities.Change your investing mind-set. Reprogram your thinking. Learn to like a sinking market because it presentsgreat buying opportunity. Pounce when the three variables come together. When a strong business with anenduring competitive advantage, strong management, and a low stock price come onto your investment screen.
12. Don’t Swing at Every Pitch

What if you had to predict how every stock in the Standard & Poor’s (S&P) 500 would do over the next few years?In this scenario you have very poor chance of being correct. But if your job was to find only one stock among those 500 that would do well? In this revised scenario you have a good chance. A few good investments are all that is needed.
13. Ignore the Macro; Focus on the Micro

The big things – the large trends that are external to the business – don’t matter. It’s the little things, the things that are business-specific, that count.It’s possible to imagine a cataclysm so terrible that the markets would collapse and not bounce back. Externalities don’t matter – and you can’t predict them, anyway. And what can you do about them? Focus on what you can know: the workings of a good business.
14. Take a Close Look at Management

The analysis begins – and sometimes ends – with one key question: Who’s in charge here?Assess the management team before you invest. A investing in any company that has a record of financial or accounting shenanigans, (creative accounting, accounting jugglery). Weak accounting usually means weak business performance. Strong companies do not have to resort to tricks.
15. Remember, The Emperor Wears No Clothes on Wall Street

Wall Street is the only place where people go to in Rolls Royce to get advice from people who take the subway.Ignore the charts. A value investor is not concerned with charts. Invest like Benjamin Graham. Graham told investors to “search for discrepancies between the value of a business and the price of small pieces of that business in the market.” This is the key to value investing, and it’s far more productive than getting dizzy studying hundreds of stock charts.Offer documents of most mutual funds say – in small print – that past performance is no guarantee of future success. Buffet says the same thing about the market: If history revealed the path to riches, librarians would be rich.
16. Practice Independent Thinking

When investing, you need to think independently.Make independent thinking one of your portfolio’s greatest assets. Being smart isn’t good enough, says Buffet.Lots of high-IQ people fall victim to the herd mentality. Independent thinking is one of Buffet’s greatest strengths.Make it one of your own.

17. Stay within Your Circle of Competence

Develop a zone of expertise, operative within that zone.Write down the industries and businesses with which you feel most comfortable. Confine your investments to them.
18. Ignore Stock Market Forecasts

Short-term forecasts of stock or bond prices are useless. They tell you more about the forecaster than they tell you about the future. Take the time you would spend listening to forecasts and instead use it to analyze a business’s track record. Develop an investing strategy that does not depend on the overall movement of the market.
19. Understand “Mr. Market” and the “Margin of Safety”

What makes for a good investor? A good investor is one who combines good business judgment with an ability to ignore the wild swings of the marketplace.
When the emotions start to swirl, remember Ben Graham’s “Mr.Market” concept, and look for a “margin of safety”.Make sure that you also understand Buffet’s concepts of Mr. Market and the margin of safety.
Like the Lord, the market helps those who help themselves. But, unlike God, the market doesn’t forgive those who “know not what they do”.
Bide your time, and wait for Mr. Market to get depressed and lower stock prices enough to provide a margin-ofsafety buying opportunity.
20. Be Fearful when Others Are Greedy and Greedy When Others Are Fearful

You can safely predict that people will be greedy, fearful, or foolish. Trouble is you just can’t predict when or in what order.Buy when people are selling and sell when people are buying.
21. Read, Read Some More, and Then Think

Mr. Warren Buffet spends something like six hours a day reading and an hour or two on the phone. The rest of the time, he thinks.He therefore advises to get in the habit of reading. The best thing to start is to read Buffett’s annual reports and letters. Finally, restrict your time only to things worth reading.
22. Use All Your Horsepower

How big is your engine, and how efficiently do you put it to work? Warren Buffett suggests that lots of people have “400 – horsepower engines” but only 100 horsepower of output. Smart people, in other words, often allow themselves to get distracted from the task at hand and act in irrational ways. The person who gets full output from a 200-horse-power engine, says Buffett, is a lot better off.Make sure that you have the right role models. Strive for rational behaviour, good habits, and proper temperament. Write down the habits, practices and philosophies that you want to make your own. Then be sure to keep track of them and eventually own them. Financial success is a “matter of having the right habits”.
23. Learn from the Costly Mistakes of Others

This is self explanatory and need no comments!
24. Become a Sound Investor

Buffet says that Ben Graham was about “sound investing”. He wasn’t about brilliant investing or fads and fashions, and the good thing about sound investing is that it can make you wealthy if you are in not too much of a hurry, and it never makes you poor.To become a sound investor, you need to develop sound investing habits. Always fight the noise to get the real story.Always practice continuous improvement.

5 Key Lessons From Top Money Managers

In an excellent book “5 Key Lessons From Top Money Managers”, the author, Scott Kays, interviewed Andy Stephens of Artisan Mid-Cap Fund. The following is a summary of Stephens’s investment philosophy.
“Security Selection"*
Acquire companies with reliable cash flows. Look for firms that possess structural competitive advantages capable of protecting those cash flows from competition. A structural competitive advantage can be a dominant market share, a proprietary asset, low-cost producer status, or a defensible brand.* Calculate the present value of a corporation's future cash flows to determine its fair market value. Try to buy the business at a sizable (ideally at least 40 percent) discount to its value.* Buy companies just prior to the start of their profit cycles, looking for firms that are experiencing internal and/or external changes. Internal changes include such things as a new management team, a big acquisition or divestiture, a major restructuring, or a new product launch. External changes include new technologies and regulatory events.
Portfolio Allocation*
Maintain a garden-a portion of the portfolio that includes small positions in stocks that meet your requirements but have not yet entered their profit cycles.* Increase your positions in companies as they begin their profit cycles and move them to your crop-that part of the portfolio where you take bigger positions in firms that have proven their abilities to meet your growth expectations.* When a stock reaches your target price or its profit cycle begins to decelerate, reduce or eliminate your position in it-harvest it.* Do not time the market; always remain fully invested.* Reduce the size of your crop and increase the size of your garden to lower your risk during economic downturns when profit cycles are sparse.* Do not overconcentrate in a single sector of the market.”