Investments and Bitcoins

Investments and Bitcoins

I was recently listening to the Berkshire Hathaway annual conference addressed by Warren Buffet and Charlie Munger.  This was being beamed live via Yahoo.

In this Yahoo presentation before the conference began they had some of their correspondents check out the people who had cone and then one of the correspondents also did a small interview with Warren Buffet.  One of the questions he asked was – what Warren thought about Bitcoins and cryptocurrencies.  This question kind of has stayed with me because this was something which I myself was not clear for a long time and then a lot of people have asked me.

As is usual of Warren Buffet he gave a very simple explanation for what is an investment and what is trading.  This is something which I found very useful and I thought of sharing.

For him cryptocurrency is not a investment because the cryptocurrency has value only in the eyes of the next person who wants to buy it so it’s a commodity for trading and if someone is willing to pay higher price you gamble on that.

Unlike trading an investment is an instrument of some kind which earns on its own even if there is no one to come and buy it from you… so if you buy farmland in your village and even if the next person is not willing to buy it from you at a higher price, at the farm you can still grow crops and have cattle etc. …. Same would be the case in terms of investment in equity…or for that matter even buying a cow can be an investment and the milk can be sold

So if you are wanting to do an investment keep this fundamental concept in mind …..will this item earn for you  irrespective of somebody wanting that item or not.….if you buy foodgrains with the thought that somebody will buy it from you at a higher price then that is trading. On its own foodgrains will not grow more foodgrains for you

So your house for your own living is not an investment – which is something I had written earlier also is a bad idea, but a house which you buy to rent out to generate passive income is an investment and therefore a good investment

Equity purchase of a company which manufacturers or makes something is an investment because the company will continue to produce its goods irrespective of whether someone else comes and buys that equity from us or not

People become financially free when they make investments. These investments earn for them and compounding grows the earnings multiple times over. The longer the runway –  as Mohnish Pabrai puts it – for compounding to play its part the more wealth you create.

Till next time….when you are in a dilema…think very simply ….will it earn for me irrespective whether the other person wants it or not.

Carpe Diem!!!

 

 

 

 

Eating A Yellow Watermelon ….

Today is the first time in my life, which is now more than half a century, that I saw a yellow watermelon

My first impression was – this is a problem – do watermelons really come in yellow colour, hope this is not poisonous, hope it is not gone bad

I checked with one of my neighbour’s – who is our Grand old aunty, she had also never seen one.  Then I called up one of our friends who has seen the world much more than me to check if they had seen a yellow watermelon, but even he was not able to comprehend a yellow watermelon

I was about to throw the whole watermelon even though it was testing sweet like a watermelon but the colour drove me crazy.

Just before throwing it, I thought of checking Google the ultimate knowledge base

And lo-behold right out there was a query on yellow watermelons and there were photographs of yellow watermelons which were exactly same as the watermelon which I had bought

Based on the input Google provided, my perception of the whole situation changed – where first I was about to throw the watermelon, I cut the whole watermelon and put it into the refrigerator.

Perceptions are such mind blocks.

I keep telling my team members about avoiding mind blocks and today I was myself in a mind block that watermelons are supposed to be red

Imagine I would have wasted such a sweet honey flavoured watermelon just because of my mind block

This same situation also happens, when it is hard earned money for service class people. Only because people say Bank fixed deposits are safe people don’t want to invest in anything else. They do not realise the risks that they take in the long-term with the bank deposits

So till next time look -for red colour muskmelons and blue colour grapes – you don’t know what life offers – but enjoy everything with an open mind

Carpe diem!

PS: If you have eaten a yellow watermelon do let me know….will like to know if I am the only person who thinks water melons can only be red.

Living carefree forever

Living carefree forever

Last week I saw this movie “102 Not Out”.

It stars 2 of the best actors in Indian cinema Mr Amitabh Bachchan and Mr Rishi Kapoor. It’s a very sweet story about a 102 year old father and his 75 year old son.
The son has lost his interest in doing anything in his life while the father is still active over the age of 100. It is an extremely sweet movie which I would recommend everyone to watch.

The movie got me thinking on how this person would have lived his life from retirement, which in India is typically at age 58, for another 40 + years.

For sure he must have had enough Investments that could last him for 40 years of zero regular income.

The average age that an Indian is approaching 70, what that means is for every 38 years of working life the average Indian will now have to survive without the facility of a regular income help him through those next 10-15 years

Given that medical expenses and medical inflation are at such high levels you really need to think how will you survive without asking for any assistance from your children

There are very few things which are inflation proof and especially for an economy which is growing so rapidly and looks to become the third largest economy in the next 15 to 20 years, inflation pressures will always be very high.

So you need to think in terms of what are your investments and what kind of returns will they give you for you to survive for those years when you don’t have a regular stream of income and still have the will to enjoy like Amitabh Bachchan in 102 not out.  You need to celebrate life not live a life of drudgery.

Tell next time
Carpe diem!!

There is nothing sexy in achieving financial freedom – part 2

There is nothing sexy in achieving financial freedom – part 2

Yesterday I wrote about how most of these Ultra rich people – Warren Buffet, Tony Robbins, Richard Koch, Robert Kiyosaki – actually followed a system rigorously even when there were roadblocks around the way

The systems required that they had to do some amount of sacrifices. Maybe they did not go out for a date when they were young because they had to ensure that they were closing something as part of their system.

I also realised when I started a bank mandate initially with just a 1000 rupees. Initially it did matter that even before I could utilise the money, the money went out from the bank. But slowly I got used to it and I went on increasing my commitments to the money getting directly debited from the bank into some Investments.

In 3 years I did not realise what a difference that had made to my financial stability. Based on the possibilities that my investments could do, I actually sat down to figure out a date by which if my assets reached a given value I could leave my job and start doing what I want.

While God has been kind in a lot of these endeavours it is also a matter of the systems working and the investments compounding in the background.

For all those young guys if they read this, just a very small portion of their income if they can directly give a bank mandate, for money to be deducted to go into an investment, without they realising, they can all become millionaires.

If you leave it to your discretion that every month you will invest based on what you save…. You will never be able to invest.

The human brain was designed to ensure that it survived and immediate gratification was more important than long term safety. Hence the brain does not allow you to take a chance with your safety of money and wants you to have it till the last moment. But when you have a system to automatically reduce the money from your bank for an investment the brain gets used to the lesser amount of money and you are able to live a similar Lifestyle even with that less money.

Today there are possibilities of various kinds depending on your appetite and the goals that you have to invest in mutual funds in SAP or in a recurring deposit whichever way you want.

Whatever you do and whatever your risk appetite, put a system in place so that it works in the background and gets you to your goal

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There is nothing sexy in the process of achieving financial freedom

FB-YOUR-STORYOver the last few years I have been reading a lot of books/biographies/auto biographies to find out some kind of drama around suddenly amassing a fortune.

Somewhere I had this feeling that there must be a magic formula or providence would strike and I would definitely be as rich as the Oracle of Omaha –  Warren Buffet. I read the Snowball by far one of the most authentic accounts of his life and other books on him. Found nothing dramatic or sexy in it.  As a matter of fact you sometimes find them boring because their life seems to have the same twists and turns.

I read Tony Robbins and his “Unshakable” and “Money – Master the Game”. Then among others I also went out and read Ramit Sethi and Richard Koch. Again nothing romantic that could suddenly help me leave my job and do what I want to do.

Now most of these guys are seriously rich so they must be doing something right.  Some definitely had their take on finding different ways, like Richard Koch with his fundamental book on 80:20.

Well if you remove the stories and hype surrounding these guys…they just ensured they were following a system continuously for the long term.

They had the same short term distractions that you and I have.  Some of them may have some luck on their side sometimes.  However they just kept at the system they decided they would follow to achieve their freedom.

Unlike me and a lot of us.  We get distracted with things, which when they appear, seem to be big.  But when you look back at life they were small blips but they broke us away from our long term goal.

Irrespective of the path you want to follow, ensure that short term blips do not deviate you from your long term goal.  There will be zigs and zags but keep at it

Carpe Diem!

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Miracles happen ….because human beings are good

Today’s blog post has nothing to do with finance directly.

In 2013 there was a massive cloud burst and floods in the Uttarkashi area in India. Thousands of pilgrims going to the Kedarnath temple and people living in the adjoining areas got drowned because of the flash floods.

Today I came to know about a boy whose parents and sister had gone for the pilgrimage.  Since 2013 there was no news whether they were alive or not.  Since their bodies were not found they were not declared dead either.  This boy was a student at that time.

Due to the sudden disappearance of his parents and no financial support from relatives, who actually disowned him, he worked at a petrol pump to somehow earn enough money to survive and complete his education.

On 12th April this year, almost 5 years later he got news from a rescue team that his parents were in coma in a villagers home.  When he reached there he found that the villager herself was pretty poor, but had taken care of his parents and sister while they were in coma.  I am told that his mother and sister are now out of coma and father is still badly unwell.

But when this story was told to me by my friend, both she and I came to this discussion that the miracle was not that in the flash floods the parents and sister of the boy survived but the fact that the villager who herself was not very rich took care of 3 unknown people in coma for almost 5 years.  After that when they come back to consciousness, this lady worked with the government authorities to trace this boy who stays in Noida – about 500-600kms away.

There was no money that she got during those years for taking care of the unknown people. During that time this boy, inspite of all the hardships, through his perseverance studied and got himself a decent job and kept his hopes alive of meeting his parents and sister again.

Its the human spirit and the fact that inherently human beings are good that miracles happen.  The news channels and papers make out that the world is coming to an end but its people like the villager and the boy who show that the world is still a pretty decent place and all over the world there are human beings who are doing positive things that make this world a much better place to live.

Lets spread the positives to make our world a better place….

Till next time

Why you SHOULD buy a house

What a contradiction….

Last time I gave you all the reasons of why buying a house (in India especially) did not make sense.

I have a friend Sanjay, who almost 27 years back had given me a very nice philosophy, which I did not heed. But the older I have grown the more I have realised, his was a better thought process.

He used to say ‘ pehle dukaan phir makaan’.  For those of you who don’t understand Hindi, it means….if you have some money, first buy a shop (invest in a business), because once the business succeeds it will generate so much money that you can buy many more houses or larger houses.  The fundamental issue over here being that if you have money and can invest in a productive asset which can supplement your cashflow then building assets and creating wealth become even more easy.

A real life example of this was the landlord of our office in Gurgaon.  He had 7-8 properties which he had rented out to offices.  Each of those properties was getting him a passive income which he was utilising to buy even more properties and he did not need to work.

I would strongly recommend reading Robert Kiyosaki’s  book “Rich Dad Poor Dad”. It  talks of a similar philosophy where cash flow (passive income) is important if you want to create wealth.

So coming to the topic of this blog….you Should buy a house if you can give it on rent and get passive income. You Should buy a house in a locality where businesses and a young migrant population are growing.  From that income you could buy more houses.

Most young people in the technology and services industry today carry home huge bonuses if their company succeeds.  Utilise a portion of that money to put in an asset which can give you passive income.  Once the passive income starts you get the opportunity to start thinking in ways of growing your wealth.

Till next time then…think your way to financial freedom through Passive Income!!!