One young fresh MBA girl walked up to me and said ‘I want to get really rich…if you give me just 1% of your wealth, I will be rich’.
I said, I will make you rich and teach you to get really wealthy, WITHOUT giving you anything, but by just teaching you…HOW to get rich. She said yes, started a SIP…and is now not in touch. Of course her SIP is continuing but that is just the beginning. She had no clue how much money a person needs to be be called ‘rich’. So I will leave the 1% joke aside.
Here are my tips to get wealthy:
1. Make copious notes. Just write down all your financial thoughts. For example I am happy with 3 calls that I made in the last 3-4 months. I bought Tata Motors DVR, Cummins – both doing well in foreign markets. Also decided NOT to buy Mahindra Holiday Resorts – the improvement in sales is just not happening. As of now I am right and happy. However I need to keep writing down why I did things. This helps in knowing how much of life is luck (mine is about 90%), knowing the right numbers on the telephone pad (of people who will pick up), research, good broker, etc….
2. Know your numbers: When you invest write down in an excel sheet or elsewhere and find out how much returns you are getting. Remember so far I may have got a 60% return in Tata DVR, but over the next 24 months it will fall to a far lesser number like 20% (this is magnificent but much lesser than 60%). Your mind registers the 60% and believes it FOREVER. That is why my 70% CAGR in coromandel international looks great. Also my 19% in Cholamandalam looks good because it also has a 7% dividend return…the total returns are fantastic, are they not?
3. Invest in only what you can understand, but EQUITIES are a must: debt investing is easy to understand – you get 8% every year, but equity can give you 40% in year 1, then 8%, then -6%, then 2%, then -4%, and 10%. This comes to 12%. However if you got rid of it at the end of 4 years, you may have got less. To understand equity you need to understand basic concepts of statistics – mean, median, mode, standard deviation. You also need to understand co-relation, so that when the ‘experts’ on media say that oil is going up because dollar is going down, you can say chuckle, chuckle and watch ‘masti’ channel like I do.
4. Investment is like a religion – and expects you to strict rules and regulations. There have been many gurus and each one choose a different path. Read all of them, but chart your own path. I have read Buffet, Graham, Templeton, Fisher (both father and son), heard Vallabh Bhansali, Chetan Parikh, Sampath, Parag Parikh – not sure how much I have copied. Trying to copy any one from such a far away distance is not only tough but also foolish, is it not?
5. Trust your adviser, broker, agent….but Verify till you are sure. Then trust him blindly. I reached that stage with my broker (adviser) in 1979.
Sure there are others like start early, learn compounding, do asset allocation,…….but these 5 steps are as important…
Post Footer automatically generated by Add Post Footer Plugin for wordpress.