Advantage small investors – SIPs

Affirmative action, asset allocation, compounding, Financial Independence, Habits, Uncategorized

This is a continuation on my rant for doing Systematic Investment Plans (SIPs)

A lot of times I hear my friends , especially female friends say this….. my father / brother / husband invested in a specific stock Rs100,000/- and the stock has never recovered back and he lost so much money, so I will never invest.

I have literally had to coax people to understand the fallacy of the argument. Losing massive money is an outcome of getting in the market without doing your home work. If you listen someone else and do your investment or you see the stock market going up and you throw a dart at any name and buy the shares then you are inviting trouble.

First and foremost if you don’t understand about the ways companies work, operate, don’t get into the market on your own. There are so many ETFs which you can buy or MFs you can get. This helps spread the risk over multiple stocks.

Second even within these always ensure you are buying regularly in small tranches. By using the SIP facility you get to average over time as well as cost so even the fall in prices is actually an advantage for you.

Unlike big investors who have to look for a big price advantage to invest their millions or billions, for the small investor this is an advantage. They can enter the market at any time because the SIP will take care of any gyrations that the stocks go through and will end up with a very large core inthe long run.

The key is that you are not investing lump-sum, you are investing small amounts and you are investing systematically and you are letting compounding play its role in the long run, then your returns will be similar to the overall market

In the LONG TERM, and this is a very important point, in the long term the stock markets have given compounded returns in double digits. If you can spare small amounts of money every month for an extended period of time, its mi days boggling to the corpus you can create. In my earlier posts I have given ready to use charts to help you compute.

However if your time horizon is short then its better to put money in debt instruments so you are sure about your returns. These returns are small single digits but they are guaranteed.

Take your first step, start an SIP and get financial independence.

Till next time.

Carpe Diem!!!

Lazy man’s guide to growing rich

Affirmative action, compounding, Financial Independence, Human Brain

Outsourcing in a lot of contexts is looked down upon. However by outsourcing the routine tasks that you tax your brain with can help you improve your decision making capabilities.

In addition by ensuring that you don’t use your brain, you can actually grow wealthy

Today I am going to be talking about forcing functions which take action irrespective of of your intentions – which the brain can sabotage.

Once you have outsourced the mechanism to invest systematically by giving your mutual fund the authority to automatically deduct money on a given date from your bank account, your brain no longer has to take any decision and you can just relax

We already have so many decisions to make every day that if we load one more , about investing the money, then the brain will fall back to default mode to take the decision some other day. Which if you had not guessed, doesn’t come any day. And life happens. And it happens to all of us.

We then feel bad and think we are procastinators.

Instead just take one decision with the help of your financial advisor and let your investments get done automatically and you will see your wealth grow. First it will not be appreciable but the longer you keep it, the exponential power of compounding will make its presence felt. And literary you don’t have to think about it. It will work whether you are sleeping or traveling

You can utilize this power of outsourcing brain functions in other areas also. I have asked my bank to pay my telephone and gas bills. So now my brain does not have to bother about the bills, their due dates etc. My bank automatically monitors the service providers and makes the payments and informs me. Since it makes the payment only on the due date, that money earns interest, till the payment is made.

This gives me more time and energy to do more high value tasks while I can be lazy about reaching my financial freedom targets.

Till next time

Carpe Diem!!!

Freedom of time

Affirmative action, compounding, Financial Independence, Habits

I have been crying hoarse over the last two-three years about getting financial freedom. How compounding can help you achieve your targets for financial freedom. I have also stressed the difference between financial freedom and becoming rich.

Financial issues are the biggest sources of tension in most people’s lives second only to health. If you are not sure of your financial situation, you cannot think of other things. The biggest lament of most people is “I don’t have the time”

However once you have a situation where you can be free from the pressures of finance, then you can start thinking of how you can make your life better.

Life becomes better when you are able to devote time with your family, go on family vacations, take time out to take care of your health . In all these things the common factor is Time.

While money can be replenished, time is one commodity which cannot be replenished. But when you are under pressures of finance, you don’t think in terms of the perishability of time and life happens and passes you by.

I still remember as if it was yesterday I was 35 and then suddenly I was past 45. Those were the most strenuous years of my life with respect to my financial situation and they just passed away with me trying to balance my accounts everyday.

If I had created my safety net the way I suggest to all the young folks through my writings, I would not have had to face those pressures. Once you have financial pressures your health also fails faster and its an avalanche effect.

So don’t worry even if you start small, let the magic of compounding of work for you so that you reach financial freedom faster, which help you get the freedom of time. Once you have the freedom of time there’s nothing which can stop you. The opportunities are endless.

Till next time then

Carpe Diem!!!

Mind Control – Part II

Affirmative action, Breathing, Habits, Human Brain, Yoga

I was thinking on this topic since the time I posted yesterday on the comment “how can I stop my mind from wandering”

While I wish, I had a silver bullet answer, I don’t.

However there are some more things which help put my mind in better state to get into flow. In yesterday’s post I already suggested you watch a video on YouTube of Ilovemarketing episode on the 50 minute focus finder. Its one of the best methods of getting the mind cleared and then fully in flow. Earlier to that I have spoken about breathing and yoga.

Another thing which I have found very useful when I am doing any activity which requires intense focus is to play Mozart and Beethoven symphonies. Those have a massive impact on my ability to concentrate when I am trying to do a job which requires immense brain power. In addition I use a paper and pencil to put my thoughts down on paper as they come.

The brain is like the CPU of the computer, it typically is working at a speed which is more than a 1000 times faster than the input-output devices connected to it . If you leave the mind idle even for a milli second, it will like to wander and think of multiple thoughts.

In the life of an average person a typical waking day of 16 hours has about 57000 seconds. You brain has massive compute ability, which means it typically processes tasks very fast and then till it gets the next task, it wanders. Potentially your brain could be wandering 50000 times in a day hoping from one thought to another.

To keep the brain engaged you should use multiple sensory organs (the input-output devices of your body).

If I am reading a book – especially a non-fiction book – then my mind tends to wander. So what I do is I use my fingers to scan through the pages diagonally. Since my eyes follow my finger, two sensory organs are involved and the mind wanders less, in addition I play Mozart and Beethoven symphonies and my ears also get involved resulting in much higher concentration levels.

Why not try these two ideas in addition to what I had mentioned about watching the video by Dean Jackson and doing yoga.

Let me know your feedback and do let me know if there are other methods you have found useful and share it with us.

Till next time

Carpe Diem!!!