Almost every other post has people believing in the above two fables in the title of this post.
Yes, they both have been right in last 5-6 yrs, however, bear with me. These are my experience over the last decade and a half.
Don’t underestimate the power of the tax-free (EEE) compounding. Always use the max limit every year. Let this be the rock on which you will build your portfolio.
A lot of people haven’t seen their portfolio in deep red, and the pain is massive. PPF brings stability
2. Asset reallocation
One of the essential things in long term planning. No asset is evergreen.
If everyone knows Mutual Funds Sahi hain and long term mein Equity will outperform, then the game is straightforward. The fact is the game is not easy.
Always look for assets that are beaten down and keep an eye on indicators that point towards them turning around.
Trust your instincts and reallocate your portfolio
3. Follow politics
Keep a very close eye on the politics of the state and the country. Politics decides the policies and policies decides which industries will do better.
If you know the politics well, you will know when to buy a thematic fund and when to exit it. I am not even talking about stocks here.
4. Don’t berate people who are buying against the tide
Whether it is stocks, real estate, gold, bonds all move in cycles. Eventually, Stocks beats the other assets classes by a few % points in the long run. The key is to buy the asset class when no one is looking is it.
Most of us are chasing the elusive financial freedom. I don’t believe in economic freedom as every time drag the Excel formula, I see costs moving faster and faster.
IMHO, the key is to create dividends, coupons, and rents that are more than your monthly salary.
Anyways, if you are buying stocks, keep an eye on the dividend policy of the company. Eventually, the companies that pay back the investors regularly tend to outperform.
6. Financial advisors
Pick your financial advisor with the same care as you pick your life partner. Trust your financial advisor after that.
However (Big, however), learn things on your own. People change, and so do the motives of your financial advisors. Never trust them blindly after a point.
If the advisor is only advising stocks and mutual funds, be careful.
7. Learn Finance
You may be an engg or a doctor or any other profession. You may have hated basic finance lectures in your school. However, it is critical you understand how the money moves around.
You must also invest your time.
Attend investor presentations as a starting point. Bajaj Fin investor presentation is an excellent starting point for newbies. Learn market trends
8. Tools to learn
- Investor presentations – Always attend these of stocks in your portfolio
- AGMs – Go to these if they are in your city. If nothing at least you will get free ice cream and lunch (sometimes). Plus you get to see the CEO and CFO. It is a lot of fun.
- Track your portfolio – IF IT CANNOT BE MEASURED, IT CANNOT BE MANAGED
- Don’t ask someone directly if you don’t understand something. Google about it and try to learn it on your own and talk to someone who might know about it. Self-learning is critical
9. Use leverage intelligently- Debt can be your friend
People hate credit cards. I always wonder why. There are points to be collected and interest-free, collateral-free credit to be taken. THERE IS NO PRODUCT LIKE A CREDIT CARD IN THE WHOLE WORLD. I have worked in equity research, M&A, Commercial banking across different countries, and I am yet to find a product as good as a credit card.
People hate home loans. Why? Use leverage to maximize your returns on equity. Of course, don’t go overboard on debt.
10. Don’t be a Kanjoos
No one likes a kanjoos. Don’t be the person you want to hate. Money can be earned. It is not tough. Saving a penny here and there won’t make your rich.
Try to maximize your gains and not worry about expenses. There are just a few years you genuinely enjoy life. Spend it well – Go to the best of the restaurants, travel business class once in a while, ask for sea facing rooms in hotels, gift that gold necklace to your wife (ya gold is lousy investment), throw money on home renovation.
Everyone is stressed these days, so if something makes you happy, that is already Alpha return.
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