Here are a few good things you would like to read this weekend.
Why you should save more
You probably by now know and understand the power of compounding. You also know that in the equation, what is in your control is the P (your investment) and the N (the time you can keep it for). You cannot control R (the return).
A = P (1+R)^N
The first level of control that you can exercise is on the P. It not just allows you to exploit the rest of the equation but brings you something far more, flexibility.
Morgan Housel of Collaborative Fund wrote in his latest post, Let me convince you to save more money:
Intelligence isn’t necessarily a sustainable advantage in a world that’s as connected and competitive as ours has become. But flexibility is…
Money and resultant savings bring you this flexibility. Read this extremely wonderful note.
So, coming back to returns, how much should you expect?
First things first, your investments have to earn you a inflation adjusted, tax adjusted positive rate of return. Call it the Real return.
To be philosophical, nothing more, nothing less.
Now, Return is a function of several variables. I explored them in a post, which you can read here.
Is more money in the market good or bad?
Well, the fact is that with SIPs, ULIPs, NPS, EPF and direct investors, lots of household savings are entering the stock market, a lot of it for the first time. Is it good or bad?
Depends what narrative you want to believe in. One says so much money and limited number of investible stocks can drive prices crazy high. Very well, it can.
The other side is the increasing money per se means nothing unless it changes your asset allocation for the worse. The asset allocation matters. Get it right. As I see it, finally, the asset allocation of individuals / households is veering towards equity.
More money in markets should also enable more businesses to access capital from the public markets and more good businesses to share their growth with other smaller investors.
What do you think?
How to succeed in investing?
What is the average investing lifespan?
50 years. 75, if you live to 100. Has your current education prepared you for investing over this time span? Unfortunately no.
Time and again, best of the academic credentials have failed to make the most of their money. The root cause of this is ignoring the basics.
Here’s what you can do to avoid the same outcome and make more relevant, sensible investment and financial decisions.
Learn and master the basics with Investing 101. Click here to read up more.