Money management is one such skill that several people are unaware of. 16 Personal Finance Principles Every Investor Should Know helps learn how to. Download: 16 Personal Finance Principles Every Investor Should Know If you want to download this ebook, i provide downloads as a pdf, kindle, word, txt, ppt, . 16 Personal Finance Principles - Download as PDF File .pdf), Text File .txt) or In the 30th year Personal Finance Principles Every Investor Should Know.
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16 Personal Finance Principles Every Investor Should Know (Master Your Financial Life Book 1) - Kindle edition by Manish Chauhan. Download it once and. About the Book: 16 Personal Finance Principles Every Investor Should Know 16 Personal Get your Kindle here, or download a FREE Kindle Reading App. Jagoinvestor Personal Finance Principles Every Investor Should Chapter 7: 10 things to do to make your financial life awesome. . Credit card you can download our FREE ebook or the appropriate chapters from our.
Acknowledgement To most readers, a book often appears to be the creation and handiwork of just one person — the author. If the book is appreciated, all the credit goes to this one person. But let me tell you that there is no way that this book could have become a reality, without the support of many people. I would like to take this opportunity to thank each of those people here. I would like to start by thanking all the readers of my blog.
That secret is "Start investing early". In the next few pages, I want to make you aware of the power of early investing and the impact itcan have on your financial life. These days, common Indian investors are worried about how to save money to meet financialgoals. When they think about the amount of money they would need after years to fund a particulargoal, it scares them!
It starts to look like a daunting and unachievable task. The big figure could be anywhere between lakh, who knows! Think about it. So what is it that this common investor should have done to make the whole process of wealthaccumulation much, much simpler? Many think that the answer lies in some "hidden" knowledgeor a big secret or just plain luck. While all of these may be important, they are not the key!
16 Personal Finance Principles Every Investor Should Know (JagoInvestor, #1)
The key to accumulating wealth is unbelievably simple - just start investing early in life. Thisdoctrine is so powerful that it sometimes even discounts the mistakes or stupidities you makein your financial life. A lot of people procrastinate, some by choice and some due to ignorance. They always think that starting with a small amount would not make much of a difference, when they aim to accumulate great wealth.
He may not be motivated to save Rs or Rs today as it looks too small to have any impact on that BIG goal. But let me show you some examples, which may look unbelievable to a common investor.
These examples will motivate you to read further and find out what you may not know yet. Then we can move deeper into the ocean of "early investing" and "the power of compounding". Example 1 Imagine two friends Ajay and Vijay.
Chapter 1 Burning The Junglenext 20 yrs. And Ajay is going to accumulate 45 lacs at the end of 30 years although he hascontributed a total of 2. Vijay will accumulate only Rs 36 lakh, despite investing Rs 3. Even though Vijay invested more than Ajay , he was not able to accumulate more money than Ajay.
This is simply because Ajay contributed more at the start. You will collect a certain amount — principal andinterest — after 30 years.
Example 3: The biggest reason why their financial life is in a deep are committing amess is not because of their lack of knowledge or their lack of crime which you will pay for allearnings.
In fact, most of them earn well and are pretty smart. They are all successful at what they do. The biggest reason is thatthey have lost that part of their financial life which could havecreated magic - "the starting years".
It all boils down to not having taken action early in life. Timeis that one weapon which, if present in your financial life, increases your chances of financialsuccess greatly. You can call it the "Bramhastra" of creating wealth.
I see a lot of people spending too much time worrying about money and wondering how theirfinancial goals will be acheived. In doing so, they are lost in the confusing world of personalfinance and deviate from the only solution they should have implemented long back in theirlives, which is starting to invest early!
When we start earning, we are generally single. We have less responsibilities and have ample waysof cutting down on our expenses. We are in a position to save a substantial part of our income. We usually have some years in hand before we get into a marriage and all the responsibilitiesthat come with it. Instead of using that precious time and opportunity, a lot of us waste it thinkingthat we can always start saving later; perhaps when we have more money or when we get a jobthat pays better.
Tell me frankly, how different has your life been from what it was last year or from how it was theday when you first started procrastinating over your saving and investing plans? We always have some reason or theother to not save or make the effort to start investing early. Remember that 5 or 10 years lost atthe start is a crime which will haunt you for the next years. Dont commit this crime!
Creating long term wealth is like growing a tree Have you ever planted a small sapling? One month after you sow the sapling, it may not look any different; but you will notice some changes after 3 months. After 2 years, it will probably have grown to a good size.
Yet it would not be big enough to repay you by giving shade and fruits. But to help it grow to that point requires a lot of patience, hard work and belief that it can happen. Growing wealth is somewhat similar to growing a tree. We start Early investing is very much like small and keep investing for the long term.
We may not be able to growing a tree Before we figure out how money grows, I would like to share with you an example which I call "Fire in the Jungle". Have you ever heard news of a whole jungle catching fire and everything getting burned down?
Now imagine how it might have all started… Do you think someone went from tree to tree, burning each one down one by one? I dont think so!
Perhaps one can go from tree to tree and bush to bush and set fire to each one, one by one, to get the same effect, i. All you need to do is to make sure is that you fire up some of the trees to a self sustaining level so that the fire catches on and spreads to other parts of the jungle.
There will come a point when it would be idiotic to burn up more trees because by the time you burn a single tree, hundreds of trees would be catching fire on their own! Chapter 1 Burning The JungleWhat on earth has this fire in the jungle to do with growing our wealth and starting early in life? It has a lot in common. The investments made in the early years of your life are the same asspreading a fire in the jungle… after a point, just like the fire compounded itself and spread sovigorously, your money will also grow to some extent and then the returns generated on it will beso great that your contributions will look small in comparison.
A lot of investors miss this partand never act on starting early! So now can you tell what makes money grow? And obviously, we alsoneed to help it to grow by investing it. When you start investing, your money starts gettingaccumulated and every year it starts generating returns which are added to the investments.
While that return is a small amount in the starting years, over time it keeps on accumulating andthen the interest per year becomes really significant.
Let me show you how…Suppose you start out by investing Rs 5, per month for 30 years. In the last year the 30th year you will invest 60, from your pocket.
However, the return for the 30th year itself would beRs 18 lakh. Just imagine that! And guess what, out of this return of Rs 18 lakh, which you get inthe last year, 12 lakh comes because of the contribution that you made in the first 10 years andthe remaining 6 lakh comes from the investments made in the next 19 years. Imagine your wealth as a Money-Tree, which wassmall when you started, but grew bigger in size over the years.
At some point, branches begin toemerge and grow in all directions. Coming back to the example, your wealth at the end of the10th year will grow to Rs What happens after 1 more year, i. How much more will be added to this Money-tree? There will be 2 kinds of additions. The first onewill come from you, which is Rs 5, per month or Rs 60, per year. The other part will be thereturn generated on the wealth that has already been accumulated. This turns out to be aroundRs 1.
So the total addition in the 11th year will be Rs 2 lakh, out of which only Rs 60, wasdue to your contribution and the remaining Rs 1.
Now, if you consider these two branches, the branch which is a result of returns generated from the existing wealth will be much much bigger than the branch which you contributed afresh.
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I guess you got my point here. Now, if you fast forward to the 29th year, your corpus would increase to Rs 1. And that would be close to Rs 18 lakh! The best part has happened already, which is the accumulation of wealth in the early years!
The take-away You will agree that the money you invest early in your life has a drastic effect on the money you accumulate over the years. This is true for long term investing. Time is a great ingredient and everyone has a good amount of it. If you loose time at the start, you lose wealth.
16 Personal Finance Principles | Investor | Investing
Chapter 1 Burning The JungleInvesting early lowers your burden laterI want to convince you that early investing is the best way to make sure that you are not burdenedlater in your life He has around30 years in hand till his retirement and he wants to accumulate a good amount of money, whichcan fund his needs and aspirations. He has decided to accumulate a minimum of Rs 3. Towards this end, he has a "plan". Using the above plan, he will be able to generate around 3.
This seems like the most intuitive way to formulate a plan. Do you agree? Option 2: He can invest Rs 10, per month for all 30 years. In this case, by increasing his initial investmentamount in option 1 by Rs 5, per month for the initial 10 years, his situation changes to a levelwhere he can continue with the same investment amount and not increase it later.
Option 3: If he invests Rs 14, for first 10 years, he does not have to invest any further. In this case, he is investing Rs 9, more than he planned to in option 1. You can see that this extra investment of Rs 9, in the starting phase is so powerful that he does not need to invest anything for the next for 20 years.
So, an investment of Rs 9, extra in the first 10 years can replace his old plan of making future payments of Rs 15, per month for 10 years in between and Rs 50, per month for the last 10 years as per option 1.
You will appreciate from this example that a greater contribution in the start helps him to accumulate the same amount of money without any later contributions. OR12 Chapter 1 Burning The Jungle ORIn a nutshell, if you look closer, you will realise that investing moreat the start gives you the freedom to invest less in the future. So, if Early investingyou want to invest for 30 years, the investments that you make gives you the liberty to reducein the first 15 years will make up a significant portion of your whole or stop yourcorpus; contrary to popular belief, it is not the investments that investments inyou make in the last 15 years.
Your investments in the last 15 years the future, withoutwill, of course, add to the corpus, but the contribution will not compromising muchbe as significant. However, if you only invest for half the tenure and leave the money to growfor the remaining 15 years, you would still amass Rs 1. You can also increase your investments by Rs per month i.
Early investment and returns requiredSuppose you and your friend decide to race for 20 km. Your friend decides to pace himself byrunning at a steady rate of 4 km per hour. Accordingly, he will complete the distance in 5 hours. Now you decide to increase your pace. But imagine the situation. You have just 2 hour left and 14 km to cover.
Your chances of winning come down considerably. Many things can prevent you from achieving that pace in the last 2 hours - you may get a cramp, you could meet with a small accident while running so fast, you could get exhausted Overall, your task is rather challenging!
What could you have done? Then even if you jogged at a speed of 2. It becomes much simpler than the previous situation. Even if you wanted to rest for 30 minutes, you could afford to do so and still complete the rest of the race at a speed of 3. Or you could alternate between jogging and walking towards the end. This leisurely pace would be possible only because of the effort you made at the start.
Your financial life is no different. If you are happy with what you have acheived in life, you have won the race.
If you contribute more at the start, things become manageable at the end. Chapter 1 Burning The JungleAnd, each and every opportunity or chance to save more or contribute more, means a lowerburden later.
Suppose you and your friend start your careers at the same time and have 30 years in hand beforeretirement. He would collect Rs 1. However, your friends life will be a lot easier If you are a conservative investor, early investing is more than necessary…its critical.
You shouldsee early investing as a "strategy" rather than a "fact" for your investments. Investment tableFormulas scare everyone. Table 1: Now suppose if instead of a one time investment, you decide to keep investing some fixed amount of money in a particular instrument every month.
I dont see anyonetalking about it in the personal finance space. For how long do you want to keep working at your job? Till you are 60? A lot ofpeople are forced to work till their retirement, battling daily pressures only because they aresuppose to bring home money to provide for the family, year after year. By now you know that if you invest early in life and utilize the time to compound your money,you can rest assured that the money starts working for you.
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16 Personal Finance Principles
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