Lesson 07 — Building Your Investment Framework
Week 02 · Lesson 7 of 7 · Week 02 — Foundations: Thinking Like a Long-term Investor
Without a framework, every stock decision is emotional: "Kisi ne bola accha hai" → buy "Price gir gaya" → panic sell "Market alltime high" → FOMO buy A frame...
Why you need a framework
Without a framework, every stock decision is emotional:
- "Kisi ne bola accha hai" → buy
- "Price gir gaya" → panic sell
- "Market all-time high" → FOMO buy
A framework gives you rules that remove emotion.
The Beginner's 5-Question Framework
Before buying any stock, answer these:
1. Do I understand this business?
- What does the company sell?
- Who are its customers?
- How does it make money?
2. Is the business growing?
- Revenue growing? (check 3-5 year trend)
- Profit growing?
- Is growth sustainable?
3. Is the company financially healthy?
- Low debt?
- Good cash flow?
- Consistent profitability?
4. Am I paying a fair price?
- How does current PE compare to historical PE?
- Is there margin of safety?
5. Would I hold this for 5+ years?
- Is the competitive advantage durable?
- Can management be trusted?
The 5-minute test
If you can't answer these 5 questions in 5 minutes, you don't know the stock well enough to buy it.
Your investment checklist
Position sizing for beginners
| Rule | Why |
|---|---|
| No single stock > 10% of portfolio | Limits damage if you're wrong |
| At least 10-15 stocks | Enough diversification |
| No more than 25-30 stocks | You can actually track them |
| No borrowed money (margin) | Leverage kills beginners |
Key takeaway
A simple, repeatable framework beats complex analysis done inconsistently. "Simple rules, consistently follow karo."
Apply it
Pick a company you're interested in. Run it through the 5-Question Framework. Write down your answers — this becomes your investment thesis.