When he sees a woman at a coffee shop who he thinks he should not bother talking to because she is way out of his league, he takes the opposite approach and introduces himself. Instead of trying to come up with something charming to say, the first thing he tells her is that he has no job and lives with his parents. And to everybody's surprise this approach of taking the opposite approach works wonders.

 

Why do I bring this up? Because if you are a retail investor, there's a good chance you could benefit from taking George's approach to equity investments.

Retail investors habitually buy high and sell low. The reason for this is that when markets are rising it is natural to feel good about the idea of owning shares, and when markets are falling it is natural to feel bad. Since most retail investors make decisions based on the way they feel, this translates into buying when the market is rising and selling when it is falling. This is of course the opposite of what we ought to be doing.

In January you would certainly not have felt like you ought to be owning more equities, but if you were George Castanza and invested against your instincts, you would be up by 30 per cent or so today.

Given that equity markets around the world appear to be recovering, there are probably quite a few of you who are thinking that now is a good time to start investing again, so I want to share with you my Top 10 tips to investing. And the first one is to be like George Castanza: ask yourself if you are making investment decisions on the basis of your emotions or your brain.

Tip two: Read. If you're buying or selling stocks, type the name of the stock you are planning to buy into Google and see what comes up. Look at analysts' recommendations, historical price movements, and recent news. This won't tell you whether to buy or sell, but at least you won't get caught out. The last thing you want is to buy a company's stock after its price has dipped and then find out that the chairman was arrested yesterday.

Tip three: Ignore your friends. The worst reason to invest in any particular stock is because someone tells you to. How many times have you been in a conversation with someone saying, "If Soandso Corp hits 50, that's a sure buy. It'll definitely go to 60-65 this year"?

It's hard not to treat this kind of advice like you would the inside tip from the mob boss that "Gorgeous George goes down in the fourth round". But the only sure thing that anyone actually knows is that no one can really be sure about what the market is going to do.

Tip four: Volatility is important. When the Hang Seng Index moves  1 per cent, that means there are some stocks that moved more than  1 per cent, and some that moved less. The more volatile a stock is, the more it will rise and fall. Small-cap companies in risky industries tend to be more volatile than large caps in traditional sectors. If you are looking for short-term gains and you don't mind taking higher risk, go for volatile stocks and vice versa if you want a bit more stability, relatively speaking. But above all, be aware of how volatile the stock that you are about to buy is.

Tip five: This one is perhaps most important. Know your limitations. Investing in equities can be a quick way to lose your shirt. It can all go pear-shaped any time. So think about how much you are comfortable to risk and how you would feel if your investment lost 20 per cent of its value.

How much you invest in equities should depend on how much cash you have to spare and what else you need your money for. If you invest your rent money in the stock market, you might find yourself at the end of the month with a stock portfolio worth less than what you owe your landlord. Getting kicked out and moving into Chungking Mansions without wireless internet will make it tough to keep track of your portfolio online.

So that's one to five. Next week I'll give you the rest of my Top 10 investment tips. But in the meantime I would be interested to hear your suggestions. At the end of my own Top 10, I'll publish the five most helpful, original or amusing ideas from readers.