Getting better in increments-Part 3 – for financial independence

compounding, Financial Independence

In this blog you have read a lot about the magic of compounding and how it can help you reach your long term goals.

I have also written multiple times on the benefits of Systematically getting money deducted from your account to directly go for your investments so that you don’t have to think about it. Tbe moment you bring the thinking into the process, chances are things won’t happen.

The last item that I have not written so much about is what do you do if you have already crossed the age of 40. Since compounding works over a very long period of time, what do you need to do to get financial freedom.

I had couple of times written about the Hemchander-Fibonacci number. If you use that logic to systematically invest the sum of the previous two numbers on a consistent basis, then you can beat the challenge of not having enough time on your side to make compounding work.

While not as aggressive as the Hemchander-Fibonacci equation, even if you were to increase your investments by 4% points every month or 10% every quarter, you could have a 46% higher core this year entering the compounding equation. If every year you keep doing this, you will have compounding work on compounding to give you an exponential growth.

Even very small increments done o er a long period consistently can help you achieve financial freedom. So don’t get bothered at what age you start investing, the key is to see how you can keep growing the core on a consistent basis.

Till next time then.

Carpe Diem!!!

Getting better in increments

compounding, Financial Independence

Have you read the book Delivering Happiness by Tony Hsieh? Its a book about Zappos and how they went on to become such a great company.

The book has a lot of interesting stories about the journey and its a nice book to know the challenges they surmounted. Somewhere in the book, there’s a very small note which stuck to me for than 10 -12 years when I first read the book.

Tony says, if you were to improve yourself by just one percent everyday, one year later you would be better than the year before by 365%. This is pure compounding.

Its a simple equation, that’s why its stuck so well even after so many years. Its profound, like E=mc^2.

Is it easy. No way.

Inspite of knowing this equation have I been able to improve myself by 365% every year. Not at all.

Knowing is something, doing it is completely different.

Life passes in seconds everyday. The amount of time we waste in managing urgent things from the boss or customers eat up the seconds and before long, one more day ends.

This is the same story with our finances. Someday we think we will start our journey of financial independence…..then life passes and before we know it we are at a stage where we have spent our lives just paying off our loans.

Take your first steps get started today. Every journey has to start with the first step.

Till next time then.

Carpe Diem!!!

The negative effects of compounding – Covid second wave


I talk a lot of the magic of compounding and how it helps in various areas of life.

Last year in the middle of the pandemic I had written about how compounding was giving power to the virus and if we don’t bring down the rate then the virus will only keep growing forever. It will follow a pattern similar to the Fibonacci pattern in the picture.

Last year in most countries people exercised restrain on their own or the governments did lock downs to ensure that people maintain distance since that was the only way to protect yourself.

Suddenly in India in the last week or 10 days the virus has again started compounding at about 40% per day. Even though in most parts of the country over the last year we have built the necessary infrastructure, nothing can match the problems that can arise if the compounding takes place at this pace.

Eventhough we are doing massive vaccination at close to about 2 million people in a day, it takes time for the antibodies to build . But people have taken this issue so lightly that the virus has used this opportunity to make such a massivee comeback.

The only way to control this virus is to keep distance from each other because you never know who is a asymptomatic carrier of the virus.

To all the readers of my blog, pls stay safe in your homes as far as possible,

Till next time

Carpe Diem!!!

How to be a billionaire

Affirmative action, compounding, Financial Independence


Now with that out of the way, let me tell you what I do know.

I do know that compounding does work and INR 2000 put into an investment in 1995 today gave me a dividend of INR8500 this year and the value of my investment today is more than INR150000/-.

You will get a lot of sites both serious ones and satirical ones who talk about showing you a path to becoming a billionaire. But when you look at where you are starting from and what you need to invest to achieve that kind of number, the amount is so huge that you never get started.

This was a case with me also for a long time. I always got around to starting my investment journey, but never did till 2013. Each time I had to let my brain take a decision on making an investment, I always procrastinated, so I put in automatic systematic investment plans, which deducted money from my bank account.

The issue is never about whether you will become a billionaire, the question is always about whether you will take action to get there. If you will take action consistently and let the magic of compounding work then you will at least reach the skies, if not the stars.

My suggestion and advice to all the young folks is always start with just a small amount which is not more than 10% of your income, but let it get deducted out of your bank account directly before you can touch it. Once you do that and not think about it, you will be surprised at what you will see after 25 – 50 years. As an example the average return on the S&P 500 has been more than 10%. Suppose you have $500 invested for 50 years in an ETF which only works on the S&P500 the number you could potential be looking at is close to $58K. So if you can avoid about 100 coffees & a doughtnut at your local coffee shop, you could be at more than 50K in 50 years. If you were to avoid it for only one year( $5*365) and invest that for 50 years you would be at about $214K. Can you save $25 in a day. Most people can. You could potentially be a millionaire, and that too just investing for 1 year.

The key point here is that you are investing – not saving. For the difference between the 2 please see my earlier blog posts.

The earlier you start out on your investment journey, the higher will your corpus become. If you notice even Warren Buffet’s meteoric rise in becoming the richest man has been in the making for more than 60 years. Its the last 15 odd years where the compounding has created such an explosive growth in his wealth.

Start somewhere, start at the earliest, start with the smallest and let it compound.

Till next time.

Carpe Diem!!!