Wit. Wisdom. Value Investing.
The secret to getting rich is simple.
Of course, I am not talking about owning a bank, or inheriting riches, or marrying someone rich as the secrets to getting there.
My simple secret of getting rich that is available to all is – start early, spend less than you earn, and invest that surplus well for the long run.
Disclaimer: I am not a financial advisor. The advice given below is not a financial advice even though my excitement might make it look like such. In fact, what follows below are just my thoughts, those of an ordinary person who works hard, and tries to save and invest as sensibly as he can.
I received a call from a 59-year old gentleman, a distant relative, yesterday. We have not met in the past two decades, so the sudden call was surprising. But not after the first minute of our talk when he asked, “I’ve heard from your aunt that you work in the stock market. I wanted to discuss my investments. Can you please help?”
“Hmmm…sure,” I said, “almost sensing that he wanted to discuss his stock portfolio with me.”
But he started talking about his upcoming retirement – planned for 2019 – and about a plot of land sitting in his hometown waiting to build his retirement home next year.
He said he had been saving and investing as much money as he could for his retirement and for building this home.
[Read more…] about Saving Your Retirement from a Stock Market Crash
Noted Irish playwright and philosopher George Bernard Shaw opined, “Youth is wasted on the young.”
What he possibly meant was that many young people have everything going for them physically; they’re in the best health they will ever be in, and their minds are sharp and clear.
However, they lack patience, understanding, and wisdom which results in so much wasted efforts.
The energy that can be directed towards building a solid thought process and action plan for the future is spent on short-lived pleasures.
Shaw’s words are especially applicable to those young adults who are starting a career and wondering if they should start saving and investing for their future or spend the next few years living life kingsize.
I had written this post in February 2012. However, given a lot of reader emails on topics covered herein, I am re-posting it.
I use a few rules of thumb when it comes to how I manage my personal finances. Here are some rules of thumb that I practice for managing my own personal finances. I hope you will find some of these useful for your own purpose.
1. Rule of 72. The Rule of 72 states that you can divide the number 72 by whatever yield you are getting to see how long it would take for your investment to double.
For instance, if your fixed deposit earns an annual interest of 8%, it will take 9 years for your money to double (72/8).
2. The number one rule of saving money is: Pay yourself first. It’s very important to set aside your savings every month before you use the money for other things, including paying of bills. Always pay yourself before anything else.
[Read more…] about 10 Useful Rules of Thumb for Your Personal Finances
Benjamin Graham was one of the most successful investors who ever lived and remains the most influential investment thinker of all time.
He was the one who taught Warren Buffett the art of investing, and was also his first boss.
Graham worked on Wall Street for more than four decades, ran a market-beating mutual fund, taught finance at Columbia Business School and wrote two classic books on investing.
Security Analysis (1934) is still the bible for professional money managers. The Intelligent Investor (1949) is, in Buffett’s words, “by far the best book about investing ever written.”
In June 1955, Graham gave an interview on the basics of handling money. Almost 60 years have passed since then, but a large number of investing ideas that Graham talked about then, remain valid to this day.
One of the many investing mistakes I made during the early part of my investing career was to be rash with cash.
One salary hike, one bonus, or one big inflow of money (family gifts etc.) and I would invest the same into stocks I liked, irrespective of what the stock markets were doing.
Cash in bank was considered a wasted opportunity and every chance to “let-me-buy-stocks-now” was grabbed upon.
The question I used to ask myself was – “Why should I hold cash when it is paying nothing while stocks can grow my money much faster?”
However, over the years and after learning my lessons (from not holding cash) the hard way, I’ve found several reasons to ‘hold cash’.
Imagine that you get up late one day and make it to the bus stop 15 minutes later than normal. But while waiting for the bus, you meet your future spouse with whom you are going to live a beautiful life. This happened just because you woke up late one day. An event that seemed insignificant at that time had a significant impact on your life.
Now imagine another situation. You work in a small company where you are mistreated by your boss. After months of being disrespected, you start to hate your job and decide to quit.
Before you quit, you speak about your experience with other employees and the result is that three other people decide to quit too. When these people find themselves unemployed, they decide to start their own business. After some time and a lot of hard work, their business becomes successful to the extent that they start competing with the company they used to work for. Under pressure of fierce competition, the old company declares bankruptcy. In a way, it all started with you quitting your job.
These two situations seem exceptional but that is what happens to a lot of people a lot of times – a small, hidden force causes a big effect in their lives.
[Read more…] about The Hidden Force that Won Me Financial Freedom
“You write so much about what your readers need to know about money and investing,” said my wife as I sat down to write my next post. “Why don’t you write what people must know about their money? You know, the real truth about money…like the 10 commandments on money?”
As always, I thought she had a point. 🙂
So, here are a few ideas – not 10, but 15 – that I’ve picked along the way, and that I believe are some of the most important ones you must know about your money,
These last two thoughts come straight from Warren Buffett, who knows about money better than what you or I can ever know.
Finally, as the famous proverb goes, “If you want to feel rich, just count the things you have that money can’t buy.” (Like that smile on your child’s face when she is with you)
So play the money game, but only for the excitement of playing it.
Don’t take it too seriously, for life’s too short to be wasted running after money.
I am not an expert on retirement and planning for life after sixty (if that is what defines the term ‘retirement’).
I am also willing to bet that anyone who has never retired can never be an expert on this subject (you can only be an expert in things you do), however sagely an advice he/she can offer on how to plan a life after retiring from active work.
But in planning and working towards my own retirement, here is one big mistake I see most retirees (and to-be-retirees) make and how it can be a such a dangerous mistake.
I’ve never heard it mentioned by retirement experts. Nor have I read a word about it in retirement books.
Everyone talks about saving money and allocating it well so that you accumulate enough to spend through the 20-30 years of your post-retirement life.
This is a good advice, but one that misses a big point.
[Read more…] about How I’m Planning My Life After Retirement
“Wadala Station?” I asked as a taxi approached me while I was returning home from a trip to the Siddhivinayak Temple here in Mumbai today.
“Come, sit,” the driver said, as I thanked my stars because a few drivers had turned my request down.
“I was going towards Chembur, and Wadala is midway, so would take you there.”
“Oops, but why does your meter start at 20 rupees? Isn’t this high than normal fare?”
“Sir, this is a cool-cab (Mumbai’s AC taxis), so the rate is higher. But don’t worry, since you don’t need the AC, I will charge a normal taxi’s fare only.”
“Thanks! By the way, Chembur is very close to my home. Why don’t you take me there?”