Ground Rules for Investing
Investing is an interesting activity and it attracts almost every one. But the basic requirement is awareness and passions are simple to understand but difficult to adapt. The basic reason is investors think about long term but they act in short term. As simple that anyone can become a good investor just by following simple and easily understood rules, which also help avoid big mistakes.
Here are my rules for investment success.

Have a Plan or a Modular Approach:
step by step goals setting and achieving them, assures you in taking appropriate risks. Invest money that you'll need in the next three years to five years in cash and short-term bonds. If you've taken on too much risk for short-term objectives, pull back now. No one knows where the bottom of this market is? It's better to cut your losses and preserve the money you already have for short-term goals. For your long-term financial goals, consider equities as in long term their returns are un- beatable.

Adapt Simple Approach:

Before entering to Stock Market directly / indirectly:-

Step I: Get Term Insurance for your life at least 10 times of your annual
income.(We say that this approach clearly states that how much you
love your family. No One wants to see the family in a miserable
state after him/her.)

Step II: Have a Medical Insurance Policy Approx. 2- 2.5 Lakhs.
(This will help you save the hard earned money both on taxation as
well as Medical front.)

Step III: Keep 3 Months Salary in Saving Account.
(This will make you brave in front of your Boss as three months time
is sufficient to find another job and will kelp you to keep
liquidity crunch away.)

Step IV: Have 12 Months Salary in Fixed Deposit/ Maturity Schemes.
(This helps in drawing medium term goals as well as a cushion for
unexpected shocks.)

At this level you are financially matured to enter in the stock market indirectly, you can follow the following steps;

Step V: Park 40-60 % of your surplus funds in Equity Diversified Large Cap
Dominated Mutual Fund.( They move steadily and stably.)

Step VI: Park 25-30% of your surplus funds in Equity Mid Cap Fund. (They move
fast but usually show high volatility.)

Step VII: Rest of the portion can be parked with Balanced Funds or Gold Funds
or can be diverted to Real Estate acquition provisions.

This is only a outline around which a strong plan can be drawn to suit the individual need and effective results can be achieved.

There are no hot stocks and funds in this world:
If you buy this year's top-performing fund or stock, be prepared that it may and may not perform well in the future because they have more or less correlation with the economy as well as the approach of the fund manager.

Discipline is the key:
Adapt the gardener’s approach that plants the seed, takes its proper care and work around regularly and gives nature full opportunity to nourish it. Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.

Buy and Hold is a winning approach:
Research has proven that, buy and hold approach has out performed all the investment approaches in the long run. Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.

Start Early:
It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.

Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to others. Always remember that do not change your plan unless very strong and compelling reasons are there.