'Human nature is human nature, and human nature would continue to remain human nature till human nature remains human nature,' said the eminent constitutional lawyer, (late) Nani Palkhivala. This phrase, when used in context of investing in equities, holds true to a very high extent.

History is replete with examples when greed and fear have taken over discipline, resulting into windfall gains and, of course, 'windfall' losses for investors.

And more sadly, small investors are the biggest losers in these phases of indiscipline (recollect the year 2000 stock market boom and bust). While greed results into bulls taking the centrestage and leading markets towards nauseatingly high levels, fear brings them back to ground zero. And small investors suffer in both these situations.

As we enter the year 2005 AD, Indian equity markets are at their all-time highs. While such a situation brings in factors that cause the 'greed' element to rear its face, investors need to practice utmost caution and not give in to temptations that rising markets like these bring with them.

This calls for high levels of discipline and, in these times, two key rules of investing given by Benjamin Graham should be held in high regard. The two rules are:

• Don't lose money, and
• Don't forget the first rule.

While investors ardently wish to follow the first rule, in this devotion, they tend to forget the second and the more important one.

If, and only if, investors could practice the second rule, the first one would need no effort. Sure, all new year resolutions do not make it past the second of January, but wisdom would be in believing that this year is going to be 'different.' Right?

Equitymaster.com is one of India's premier finance portals. The web site offers a user-friendly portfolio tracker, a weekly buy/sell recommendation service and research reports on India's top companies.