Learning about how to handle finance is so damn complicated that no school or college wants it in its syllabus!

Most of what people like me write are anecdotal – it is not easy to just copy. For example if I say buying good MNC shares in the 1977 compulsory listing would have been a great way to build your retirement portfolio, I would be right. However this is useless FOR YOU, because you cannot do that.

Similarly Balakrishnan in his blog (http://frustrationsamalgamated.blogspot.in/) has written about buying 2 flats – one for living and one for renting. Again anecdotal because it is very difficult to know where to buy, how much to buy, how the usage turns out over 20 years, etc. So just like my post, accurate, but you cannot cut n paste UNLESS you know in which location to buy so that it is useful for you WHEN YOU retire.

You cannot buy the shares that my dad bought or what I bought, or the location where Bala bought his flats – you need to figure out for yourself.

Somebody who invested in gold in the 1980s and held till 2000 should be termed unlucky, but a guy who bought it in 2000 and is still holding will be laughing all the way to the bank.

So real estate, equity, gold – have behaved differently over different periods of time. Yes they have all been volatile – which means a SIP would have worked. Alas! a SIP in real estate is just a fantasy and does not exist for the common man. Also gold has such a poor long term track record that one is worried about the returns AFTER deducting management charges of a mutual fund 🙂 Maybe you will be left with NOTHING because of the charges!

All these 3 examples are anecdotal!

To learn about finance, you need to learn the simple things – start early, convert savings to investments, pay all your credit card bills on time, take a term insurance, invest regularly, do not interrupt the compounding process, earn well, look after your health, spend smartly…..etc. etc.

So knowing what are the basic principles of finance (etched in stone, and cannot change) and what is tactics is important. Yes you may not be able to find tomorrow’s Colgate or tomorrow’s Hdfc, but you can still do a SIP in a cheap index fund. So invest in an index fund and add 2-3 shares to your portfolio every year – which means you will have a diversified portfolio SIP (index fund) and you will be building a portfolio also. After 5 years start comparing your portfolio vs. index or some of the top performing schemes. A rigorous and disciplined exercise will make you a good fund manager or tell you it is not worth the time spent on researching (to buy 3 you will research 40? ) ….

Remember your principles, read about incidents, do your own thing. If you do not make mistakes it means YOU are too conservative, if you lose too much, it is time to stop it, that is all.

 

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  1. “To learn about finance, you need to learn the simple things – start early, convert savings to investments, pay all your credit card bills on time, take a term insurance, invest regularly, do not interrupt the compounding process, earn well, look after your health, spend smartly…..etc. etc.” really essence of all personal finance jugglery!

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