Time horizon, risk and your plan

Same stock, different person, different answer

"Is this a good stock?" has no answer until you add "for whom, and for how long?" A sound bank at a fair price might be a fine five-year investment and a terrible two-week trade (it can easily drift sideways for months). A volatile small company might be a reasonable short trade for an experienced trader and a disaster as someone's retirement savings.

Most people who lose money on NEPSE don't lose it because they picked the "wrong style". They lose it by mixing styles without noticing: buying as a trader ("it'll pop next week"), then holding as an "investor" when it falls ("it's a long-term hold now"). Decide which one you are for each position, before you buy.

Risk per idea, not per hope

Before you buy, decide two things: where you are wrong (the price, or the event, that would prove your idea false) and how much you're willing to lose if you are. Many careful traders risk about 1-2% of their capital on any single idea. Then the position size follows from the maths:

For long-term investors, the "stop" is often not a price but a thesis: "I'm wrong if bad loans keep rising for three quarters" or "if the plant still isn't generating by next monsoon". Write it down just the same.

Diversify - sensibly

• Across companies: no single stock should be able to sink your portfolio. Many investors cap any one holding at 10-20%.
• Across sectors: five banks are not five different bets - they rise and fall together (lesson 9).
• Not too far: thirty stocks you can't follow is not diversification, it's a collection. Most individuals do well with 8-15 they actually understand.
• Outside shares: keep an emergency fund in the bank. Money you may need next month doesn't belong in shares.

Write the plan before you click buy

Decisions made before a trade are calm; decisions made during one are emotional. A plan takes two minutes:

Question	Example
Why am I buying?	Good bank (ROE 15%, low NPL), P/B below its 5-year average, trend just turned up.
Investor or trader for this one?	Swing - 2 to 6 months.
Where am I wrong?	A close below Rs 425, or NPL rising next quarter.
How much do I risk?	1% of capital = Rs 5,000 → 200 shares.
Where do I take profit?	Near fair value (about Rs 540); sell half there, trail the rest.

Keep a journal, judge the process

Write down every decision and what happened. After twenty or thirty, patterns appear: maybe your fundamental picks do well but you sell too early; maybe your "quick trades" lose money every time. One trade tells you nothing - a good decision can lose and a bad one can win. Judge yourself over many decisions, not one.

See it live on MacroLens NP Portfolio tracker → Your holdings, profit and tax in one place - free with an account. See it live on MacroLens NP Watchlist → Keep your shortlist in one place and get alerted when prices reach your levels. See it live on MacroLens NP Track record → How our own readings have done - judged over hundreds of calls, good and bad.

Check yourself

3 quick questions. Pick an answer for each, then check.

Q1 Capital Rs 5,00,000, you risk 1% per idea, stop is Rs 25 below entry. How many shares?

20 200 2,000 5,000

Q2 Which matches a long-term investor?

Checking 5-minute charts all day Buying good businesses at fair prices and holding for years Selling every 2% move Following every tip

Q3 When is the best time to decide where you'll sell?

After the price falls Before you buy Never When a friend tells you

Check my answers

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