Lets start having A lesson of Buffettology. What Warren Buffett says about basic investing, spending, savings are so true, that almost all of us know it. However too many of us are not following it. So it is useful if once in a while somebody can just refine the memory.
If it does make a change in your life, thank GOD because this is common sense. Warren Buffett said it once, I am just trying to reproduce it. It helps because you did not remember it. Or you did not do it.
On Earning:
"Do not depend on a single income, Invest and create a second/ third source of income"
A man should not relay on one source of income. when you are young your first task should be saving and investing that money in different asset class for better returns at minimal risk. By creating a multiple sources of income you should quickly reduce your dependence on your job. This can help you to set out on your own one day. The quicker you can do it, the better.
On Spending:
"If you buy things that you do not need, you may soon have to sell things you need"
OK, Warren Buffett is being very harsh, but it he summarizes today’s generations reaction towards ‘luxuries’. As a part of Gen X we were perhaps criticised for some of our expenses, so it could be a Generational thing even for Buffett. However having goals and knowing where you are going, and not spending on luxuries just to ‘show off’ are important lessons for all generations.
On Savings:
"Do not save what is left after spending, instead spend after you save/invest"
Pay Yourself first.
Before you pay anyone else, is the wisest thing you can do with your financial resources is to pay yourself first. Put a portion of your earnings into savings and investments. You have no idea when you could require that sum of money.
It is usually a good idea to have savings for any unforeseen circumstances.
On taking Risk:
"Never test the depth of the river with both your feet. "
If you are doing something, do small. If you are a new investor, do not be carried away by profetional investors and Traders and put all your money in equity. Do a SIP with a small amount, and test the waters. Do a SIP of Rs. X (which could be 8-10% of your take home pay) for longer period ie 5 years and then step up. And have some research and understand risk of inflation, and the concept of REAL RETURNS.
On Investing:
"Do not put all eggs in one basket."
Immaterial of who you are and how much you understand, create a portfolio. A full range lunch plate is always better than just one item. So create a portfolio with bonds, bond funds, ppf, nsc, equity, equity mutual funds, …..and on the risk side medical and term insurance.
On Expectation:
"Honesty is expensive, do not expect it from cheap people"
Not everybody is honest, nor does everybody want to be honest. Honest advisers are difficult to find especially in Health and Wealth.
You will definitely find many people around you who would be loyal and honest to you, but also, you will come across a lot of people who are not loyal at all.
However, you should not get disappointed by that, but should rather understand that the reality is such that you cannot wish to have it from every person.
On Time Horizon:
"Rome was not built in a day"
it takes a long time to do a job or task properly, and you should not rush it or expect to do it quickly.
While investing, we concentrate only on the returns and we want those returns as soon as possible. We want big from the start. In the rush for high returns, we lose sight of the avenues we are investing in and the need for a gestation period for the investment to yield some returns. Investing in SIPs is same as laying bricks slowly and continuously to build an empire of wealth. This may take time and test your patience.
HAPPY INVESTING!!
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