Author's example on happiness is " a man was given offer that "he can get a land equal to distance he can run, he ran, ran, ran and died. Don`t work at the expense of happiness and life. Keeping this back of the mind, let us deep dive into principles of investing.

A fundamental principle for beginner investors is understanding that investing does not offer instant gratification. Many novice traders in the Indian market fall into the trap of attempting to play the market for quick gains. It's essential to approach equity investing with the mindset that you should only invest money you can afford to leave untouched, regardless of market fluctuations. The author advocates for long-term equity investments, noting that a well-structured stock portfolio often outperforms bonds or certificates of deposit. Those who focus solely on bonds may not realize the opportunities they are missing. Furthermore, the author suggests cultivating a daily habit of reflecting on your investments, as this mindset can help you outperform 95 percent of fund managers in the long run. 

The author advocates for a well-diversified portfolio, recommending at least 10 companies—more than 5 in the worst-case scenario—with 1 or 2 good dividend-paying stocks included. It's crucial to invest in companies you understand, particularly those in which you already spend your money if they demonstrate solid fundamentals. Building a portfolio isn’t a one-time task; ongoing research and monitoring of your investments are vital. The author highlights the potential of small companies, as they often provide higher returns over the long term due to their growth potential. In fact, the best stock to buy may be one you already own.

A key principle to remember is the Rule of 72, which suggests that to double your money at a 15% return, it will take approximately 4.8 years. A recommended fund allocation includes 1 value fund, 2 quality growth funds, 2 special situation funds, 3 capital appreciation funds, 1 emerging growth fund, and 3 convertible securities funds, creating a robust portfolio. Companies that have consistently raised their dividends for 10 to 20 years can offer reliable returns, while a market condition to watch for is when long-term government bond yields exceed the dividend yield of the index by 6% or more, signaling a potential shift from stocks to bonds.

Regular portfolio checkups every six months are essential to assess the health of your investments, as a "buy and forget" strategy can be unproductive. The author suggests dividing your portfolio into small growth, cyclical, and conservative stocks, and adjusting your holdings accordingly. After a bull run, consider selling some growth and cyclical stocks to buy into more conservative options, and do the opposite during bear markets to maintain a balanced approach

To avoid common investment mistakes, it's essential to maintain an open mind and not develop an emotional attachment to specific stocks. This mindset helps prevent biased decision-making. Before investing in low-priced stocks, it’s crucial to consider the performance of bonds, as bond prices can indicate broader market trends that may affect stock valuations. Additionally, competition in business is not always healthy; it can lead to price wars and diminished profitability. By staying objective and informed, investors can navigate the complexities of the market more effectively.

Investing in cyclical stocks and undervalued situations can potentially yield significant returns, sometimes 2 to 5 times your initial investment. Typically, cyclical stocks lead the market recovery at the end of a recession. However, it's crucial to exit these positions at the right time; staying in too long can lead to losses, much like playing blackjack. Unlike some other investments, a low price-to-earnings (P/E) ratio is not necessarily an indicator for buying cyclical stocks. Key sectors include aluminum, steel, paper, automotive, chemicals, and airlines. During a recession, I pay particular attention to these cyclicals and assess whether a company’s balance sheet is robust enough to withstand another downturn. Additionally, analyzing capital spending is important. Cyclicals are not ideal for long-term investment; while they may offer moderate returns, those who effectively ride the market’s ups and downs can achieve greater gains. A useful indicator for automotive stocks is the price of used cars; when used car dealers reduce their prices, it often signals trouble in selling, which can indicate challenges for new car dealers as well. 

Investing wisely in the stock market requires careful research and strategic decision-making. A strong company typically increases its dividends annually, but it's crucial to thoroughly investigate a company's fundamentals by reading annual and quarterly reports, and even reaching out for updates. No matter how attractive a dividend may seem, a company must consistently improve its earnings to prosper. Regular portfolio reviews can help assess this.

It's advisable to invest at regular intervals rather than a lump sum, and to consider buying more shares when others are selling. Look for companies with sales and earnings per share (EPS) growth rates of at least 25% compared to the previous year, indicating strong demand for their products or services. Assessing financial strength and debt structure is also essential, as a few bad years should not hinder long-term performance.

Understanding the reasons behind past sales growth is crucial; only the most adaptable investors can thrive in the market. Interestingly, retail and restaurant sectors can offer significant payoffs, growing as quickly as tech companies but often with less risk. Restaurant chains, in particular, rely heavily on capable management and methodical expansion.

The amount of time you dedicate to researching stocks should correlate with the number of stocks you own, so it’s wise to avoid overextending your portfolio. Current market conditions, like short-term treasury bills paying higher interest rates than long-term bonds, are rare but important to note.

The "January effect" suggests that buying small company shares at year-end and selling them in January can be beneficial, as investors often book losses to offset tax liabilities. A good rule of thumb is that a stock should sell at or below its growth rate. Companies with high price-to-earnings (P/E) ratios that are growing rapidly can outperform those with lower P/E ratios but slower growth rates. It's acceptable to pay a premium for high-growth companies.

Monitoring same-store sales and avoiding companies burdened by excessive debt is crucial. Be wary of inventory levels; if they rise beyond normal levels, it could indicate management is hiding poor sales performance. Insider buying is a positive sign, and acquiring shares below the price paid by owners suggests a good investment opportunity.

In overheated industries, profits may dwindle, but survivors in struggling sectors can rebound quickly once competitors disappear. When analyzing annual reports, favor companies with fewer color photographs, which may indicate a more prudent approach to expenditures. The equity-to-assets ratio is a useful measure of financial strength.

When Company X acquires Company Y, the excess paid over tangible assets becomes goodwill, which can affect reported earnings. Thus, Company X may appear less profitable than it truly is, potentially leading to undervalued stock opportunities. In distressed sectors like utilities, buying when dividends are omitted can lead to gains when those dividends are restored. Additionally, government sell-offs often present buying opportunities due to their undervaluation.

Finally, historical trends show that privatizing telecommunications companies can yield significant rewards, and Wall Street may be slow to react to good news, allowing savvy investors to capitalize on potential profits. It's a misconception that stocks that have already risen 200% can’t provide further gains; opportunities often exist even in seemingly overvalued situations.