Rule no 1.

Buy only what you know. Every business man buys rubbish, when he begins to invest his money. He scorns a 10% return. Every amateur investor is a rainbow chaser.

Rule no 2.

Never buy, give, lend nor invest under pressure. Always, when you are asked for money, postpone your answer until the next day. Once a man is an owner, he must beware of excitements. He must keep a level head. He must go home & talk the matter with his wife. A woman is always more suspicious.There is no good reason why you should give a man your money just because you cannot answer his arguments. Neither should you give it to him just because you are over-powered by the force of his personality.

Rule no 3.

Speculate on properties, not on schemes. A property is anything that has an intrinsic value, while a scheme depends for its value entirely upon the way in which it is carried out. A property is tangible. You can always sell it, if you wish, in a week or two. But a scheme is an idea. It has no existence in the material world. It is a babe unborn. A scheme appeals to the imagination. It takes the mind away from all details of cost & management. It deals with hope & optimism & desires; not with facts & difficulties & losses. A scheme tells people what they WANT to believe & not what they OUGHT to believe. Consequently, schemes are eternally popular. Schemes are for those who can afford it. It is not for people of small means & little experience. The basic difference between a property & a scheme, is that a property retains its value, no matter who owns it; while a scheme is entirely a matter of honesty & good management.

Rule no 4.

Buy only what can be quickly re-sold without a loss. Don’t get stuck with something that you can’t sell. Thousands of people make this mistake in buying land or houses. They go into some out-of-the-way place & build a house. Then, 5 years later, when they try to sell the house, they find that nobody wants it. It has no regular market value, & they must either sell it for a song or wait for years to find a foolish buyer.

Always in buying, there are several facts to bear in mind: You may change your mind. The house that pleases you today may displease you tomorrow., or displease your wife, which is still more likely & serious. Price is made by demand, not by cost or value. Price is what somebody will give for it. The more unique & abnormal a property is, the less likely you are to find a purchaser.The more ordinary & common-place a thing is, the greater the crowd of buyers. Ordinary people want ordinary things, & nine-tenths of the people in the world are ordinary.

You must keep your business in such a state that you can turn it into money, if necessary, in a short time & without loss. This is the ideal that few of us can reach. But the nearer you are to it the further you are from bankruptcy.

If you want to see this illustrated in a dramatic way, go to an auction sale & notice the immense differences in the prices obtained. A handsome table is put up. Everybody wants a table. Twelve people bid against each other. It is knocked down to Rs. 3000. Its real value is Rs. 2750. Then, a large plate-glass mirror, of peculiar shape, is put up. Only 2 people bid. It goes for Rs. 1500, although it costs Rs. 10,000. So a part of the value of every property depends upon its saleability. Unless you have money to lose, buy only what can be quickly re-sold without a loss.

Rule no 5.

Take your profits. That is, in business the main thing is the profit, not the process, whatever that may be. It is better to make small profits quickly than to make a big profit eventually. There is old story of the silly fisherman who caught a fish a foot long. He put it back in the water & said “I’ll come & get you next year.”

Rule no 6.

Almost every one buys when the crowd buys & sells when the crowd sells. The crowd always loses. Never buy when there are more buyers than sellers, or you are sure to pay too much. Never sell when there are more sellers than buyers or you are sure to get too little. Always buy from pessimists & sell to optimists. It is an odd fact of human nature, that when a price is high, we think it is going to be higher; & when it is low, we think it is going to be lower.

Rule no 7.

Keep your money moving. The most efficient capitalist in the world is the newsboy. He makes 200% profit a day. How? By keeping his money & his goods moving. He starts in the morning with 50 paise. He buys 25 newspapers & sells them for 75 paise. He does this 3 times a day. Result: At the end of the day he has Rs. 1.25. He has sold 75 papers & made 75 paise profit. A jeweler turns his money once a year; the newsboy 500 times. A shop or a business is a temporary depot & not a warehouse.

Rule no 8

Borrow all you can use. Dare¬† to borrow. Many business man has a horror of debt. He plays safe. Nothing is more profitable, in the long run, than a business risk taken wisely. There is nothing so cheap as money. Get it from a bank if possible. A bank’s business is lending money, & a bank will give you better terms & be more merciful in a hard year, than any friend. Banks are supposed to be hard & heartless. The fact is that they are not. The last thing that any banker wants to do is to ruin one of his borrowers. If you cannot borrow any money from a bank, you had better take it as a sign that you should not borrow any at all.

Rule no 9.

Borrow for expansion, not show. Expansion means the growth of the business itself, while show means hanging ornaments on the business. There is no such thing as a compulsion of growth. A growing business is like a growing boy. It cannot be kept in the cradle. It must have larger quarters. But show is what we like to have, rather than what we need. To buy an umbrella-that is compulsory; but to buy a gold-headed cane-that is appearance. Too many men enrich themselves & impoverish  their business. No money should ever be taken out of a business, if the business will miss it. New Buildings! There you have one reason why dozens of firms fail. There are two Master-Motives in business- Profit & Pride. If you borrow for profit, all is well; but if you borrow for pride, then your business is in danger.

Rule no 10.

Give, but never lend. Leave lending to bankers & pawnbrokers. They know how. You don’t. They have means of protecting themselves. You have not. Lending is a halfway thing. It is neither giving nor investing. It is worse than betting, for there is no excitement in it- no sport-no possibility of good luck. If a friend of yours tries to borrow money from you, first ask him why he does not go to a banker. No one likes a lender. That is a very strange fact. We should give oftener, & we should only give to people who are doing their best to help themselves.

Rule no 11.

Buy the ordinary shares of the best company in the worst industry. There is almost always some industry that is in the dumps. Then, there is always one company in this industry that is known to be safe & progressive & well financed- a company with a big reserve. No industry remains always in the dumps. All industries have their ups & downs.