Investments as confidence builder

Financial Independence, Uncategorized

I have been writing about how investments can help in getting financial freedom. Have written extensively on how even a few percentage points of differences can make substantial differences in your earnings in the long term. Have also shared about how having different buckets of investments can also help you plan your vacations or other activities, which can make you happy.

Yesterday I was reading a book by Dean Graziosi – Millionaire success habits. While this book is not about investing styles and strategies, I would highly recommend you reading this book for the overall enhancement in the quality of your life. It helped me identify a few blindspots which I didn’t know I had.

In one of the chapter’s. he talks about stacking some money from whatever you earn to increase confidence. This was a new take on a topic dear to me.

I have also written earlier about how even very small amounts invested over long periods of time can make you wealthy, because the amount is never the issue…. it is the duration and the interest rates which determines how wealthy you can become.

Dean’s logic is that when you stack even small amounts, it gives your brain the satisfaction that there’s money for a rainy day and therefore you feel better, more confident and your decision making improves.

I would think confidence is a precursor to multiple things other than just pacifying your hyper active brain and taking decisions. When you are confident, you are buy definition not fearful. As per a study human beings have 70-80 thousand thoughts in a day out of which more than 70% are negative thoughts. Since our brain still has “fight” or “flight” response to most things these negative thoughts spiral into some of the other kind of fear.

Fear can be from you losing your job to your health to speaking to an unknown person or speaking in public. Most of the fears however boil down to either not having money (food) or health which are the most primal fears going back to the time when we lived in forests and hunted for food.

By stacking money and investing it you can give your brain positive inputs so it does not go into the fight or flight mode.

In addition the compounding equation starts playing. An ideal way to do this would be putting regular amounts into SIPs from mutual funds or into SIPs of ETFs. You can start SIPs in India from as low as Rs500/- (USD 7/-) per month.

Most people, like Tony Robbins says so often, over estimate what they can do in one year but under estimate what they can do in a lifetime. This Rs6000 (Rs500*12months) will become close to Rs100,000/- (USD 1500/- ) if invested for 20 years at an interest rate of 15%. If every year they were to invest a similar amount, then after the 20th year, EVERY YEAR, even if they don’t invest anymore they will definately have Rs100000/- coming without effort and securing their future.

Now if you know that even the small amounts of money that you are stacking will ensure your future, you would be able to take on your “present” with more confidence. And if you make your “present” better, your future will automatically turn out to be better because your future is based on the foundation of your “present”