Power of Compounding is eighth wonder. How?

Anyone can solve the equation 6+6+6+6. But ask somebody to calculate 6x6x6x6 without a machine and they will be confused. The human brain is designed for linear processing, not exponential.

Some examples are completely beyond comprehension: “A piece of paper is folded in two, then in half again, and again and again. How thick will it be after fifty folds? What would be a ridiculous number? Well, let’s assume that thickness a sheet is apprx .004 inches, then its thickness after fifty folds is a little over sixty million miles. This equals the distance between the earth and the sun” Linear growth we understand intuitively.

However, we have no sense of exponential growth.” Try this at home. You cannot fold a paper more than 6 times with hands.

The most powerful force in the universe, as Einstein referred to it, which many of us avoid for two main reasons.

1. One, most people just don’t understand how it works. For instance, 10% growth for 15 years is not 150%, it’s 417%!
2. The second reason why many fail to take advantage of compounding is because it takes time.

Warren Buffett was not rich forever, 95% of his net worth was earned after his 60th birthday. Till than he just waited to compounding to work in his favor.

Strongly avoid event-based investment calls such as budgets, monetary policies, elections, etc. Real assets created by bypassing this noise and long-term investments.

The most dangerous act in Retirement Planning is, ‘I will invest only in highly safe investment for Retirement corpus’. Why it is dangerous? Because it deprives the investors to take growth oriented decision. There is no growth if one doesn’t take some risk.

Planning for Retirement and Retirement Planning are two different phases.

Planning for Retirement – In this phase, one is planning to create wealth for retirement which is 10, 15 or 20 years in future. While being young, one can aggressively participate in Equity investment by SIP route and take maximum benefit of compounding. However, the equity allocation should gradually come down when retirement age is nearing.

Retirement Planning – In this phase, one is already retired and have received money from various sources. Investment in this phase takes care of cash flow, liquidity and safety. The significant task here is to manage taxation. During years in retirement, one cannot afford the outgo of taxes. Cash flow through SWP mode is desired situation to receive it as regular income.

In Formula One racing, the biggest advantage is that the driver has to take immediate lead once the race starts. It is winner’s strategy to take lead in the initial moment.

Similarly, Planning for retirement is a long term race. While planning for it, one must take first step lead by adopting aggressive investment strategy. Of course, it depends on the age on which one is planning for retirement.

We believe that retirement is the single most important goal which is need of the day.

Our love to Conspiracy Theories

Our brain is wired for analytics. Brain makes simple problem complex and tends to start believing complex solutions only.

Same goes with negative news making rounds in various media citing economic slowdown, low growth rate, war mongering, international disputes etc. Brain accepts all these complex analogy which give negative signs.

However, let me put some very positives news of last week:

1. IRCTC IPO subscribed 112 times against the IPO size of Rs.645 crores. It is highest collection for the PSU.
2. Bharat 22 ETF received the bid of Rs.23,500 crores against the basic size of Rs.2000 crores. It is listed on the stock exchanges then also received the 10 times bid of the size.
3. CDSL has opened the highest number of Demat accounts in the month of September in the current financial year.
4. Movie ‘WAR’ starring Hritik Roshan collected more than Rs.100 crores in the first 3 days.
5. Amazon and Flipkart reported more than Rs.19,000 crore good sold in recent sale.
6. XIAOMI brand of cell phones reported that they have sold 38 lakhs smartphones in just 7 days.
7. Mercedes delivers over 200 Mercs on a single Dusshera Day! It has outperformed own expectations.

What went past is available with everyone to tell but what comes in future is in no one’s mind to expect.

Focus on future earnings instead of gossiping about the past.

Doctor give medicine for health. I give some Investment Mantras to read daily for wealth.

1. 80% of gains come in 20% of time. So an investor needs enormous patience to hold investments for 10 or 20 years.
2. Why not all investors get rich? They like to get rich through a shortcut. But we all know process of becoming rich goes through many years of discipline & patience.
3. Compounding is back loaded. It works well only over a long period of time. There is no substitute for time in compounding.
4. 99% of the time, doing nothing is the best thing to do in the market. Activity hurts. Sit still.
5. You cannot predict or control market. What you can control is how much you save, investment process and behavior. Focus only on that.
6. Markets usually run ahead or fall behind. Rarely in stability. Over or under valuation cannot last for long time. Don’t time the market.
7. Buying and selling is action. Ultimate reward comes through ups and downs.
8. Not investing in equity is more risky than investing in it. Remember, you need to beat the inflation and retain your purchasing power.
9. We see past bear markets as missed opportunities. However at the same time we do not have guts to think of future bull markets. Strange investor psyche.
10. We question someone’s mental health if s/he keeps reviewing value of his house every day. But that’s what we keep doing with our equities.
11. Equity investments are subject to behavior risks.
12. Always keep a check on your emotions while investing.

At a time, Tightrope Walking was widely famous and was practiced by many as adventure.

A similar tightrope walker started to walk on a rope tied between two tall towers at several hundred feet above the ground. He wanted a point to prove to the audience. He was slowly walking & balancing a long stick in his hands. The most dangerous thing was he had his son sitting on his shoulders.

Everyone down were watching him in bated breath and were tensed. He slowly reached the second tower. Everyone clapped, whistled and welcomed him. They shook hands and took selfies.

He asked the crowd, “Do you all think I can walk back on the same rope now from this side to that side?”

Crowd shouted, “Yes, yes, you can.”

“Do you trust me?”, He asked. They said, “Yes, yes we are ready to bet on you.”

He said, “Okay, can anyone of you sit on my shoulder? I will take you to the other side safely.”

Everyone became quite. There was stunned silence.

Moral: Belief is different & Trust is different.

For Trust you need total surrender. This is what we are lacking towards God in today’s world.
We believe in God. But we don’t trust Him.

In Investment, we never want to give away previous time for wealth to create similarly what that tightrope walker gave in practice for perfection. In fact, we bet on other’s success to make it ours. We make ourselves betting community.

Instead of betting here and there, we have to trust on ourselves and our Financial Advisor. That is the main reason why a robot can help you make a transaction but will not be able to understand the hardships you have put behind earning it. Choose your Advisor well.

A young professional just started his career, earned handsome amount of money and had decent standard of living. He got married and had children. He continued to provide great life standard to his family. Now the story starts…

Scenario 1. He met one of his “Hello” friend who was extremely fascinated by movie ‘Zindagi Na Milegi Dobara’. His priorities were Mobile / Bike / Car / Travel to exotic places, expensive gadgets etc. As per his “Hello” friend’s advice, he spent in life style expenses in short period and left with no Savings.

Scenario 2. He met his “Wise” friend who was fan of Bollywood movie but never let fictional movies decide his future and had proper list of priorities in place. As this “Wise” friend’s advice, he opted a Goal based Financial Planning Approach which is a boring process but sure enough to establish financial strength.

Now Real Story: Just think about those unfortunate thousands of Jet airways employees. They had fantastic Job with decent salaries. Many may have burden of EMIs. A nightmare, which they never have thought for.

We all have good intentions when it comes to saving money, right? In reality, you’ll only start saving money when you develop healthy money habits and your future needs become more important than your current wants.

“It’s good to have money and the things that money can buy, but it’s good too, to check up once in a while and make sure that you haven’t lost the things that money can’t buy.” – George Lorimer

Goal Based Financial Planning is the first step towards becoming your “Wise” friend.

In Quantum Physics, there is a theory known as Observer Effect. If you view a cone from front it will look like a triangle but if you view the same cone from top you will find a circle. While the object does not move or change, we still experience a change. This observer effect is applicable in our lives as well.

If one looks from only one perspective, the outcome may arrive the same. For getting a better outcome, one needs to look at things from a different point of view.

The Coke Story

In April 1865, a doctor & surgeon named John Stith Pemberton fighting in American Civil War got chest wounds. To ease his pain, he started using Morphine. In next one year, he realized he got addicted to Morphine. To help himself, he began experimenting with pain killers. After multiple rounds of failure, he finally made a recipe from Cocaine leaves or COCA and Kola nut which contains Caffeine which eventually lead to the evolution of COCA Cola making it the biggest brand in the World.

This is exactly what it means in long term investment. We are being taught for Long Term investment but we in turn stick to that specific scheme for really long term forgetting that a scheme is temporary but investment is permanent. As an Investor, we have to detach our self from the said schemes and look for performance.

Hello Investor encourages to do Portfolio Review at regular period for long term investment and discourage sticking to a scheme for long term.

“Everyone has a plan until they get punched on the face” – Mike Tyson.

You keep hatching plans for future and suddenly something untoward happens and you don’t know what to do.

In the game of boxing, the person who keeps standing till the last is the winner. The one, who can take the blows relentlessly, falls down again and again but doesn’t give up and gets up again to hit back, is the one who wins.

So is life, you don’t know what can happen next. You plan scenarios, you plan tomorrows, you plan future, and unintended Outcome hits you. This is the time you have to stand up again after that blow. This is also popularly known as The COBRA effect – Your directed actions & planned for desired result leads to exactly opposite outcome.

What protects you then is Capability, your inner strength to bear the situation to hold the ground & to rise again.

This is exactly what requires while investing in equity market. When you hear lot of information through various mediums you device your opinion and start taking actions according to that individual opinion. But what matters is your appetite to take that blow if your opinion does not fall in place as per your plan.

Only those investor are successful who take this blows of volatility and get up for new action.

Hello Investor passes a strong message to remain committed and disciplined during the investment journey even if blows of uncertainty and volatility hits them.

Here is a WhatsApp forward message put in right perspective.

• Car sales going down, Ola/Uber rising.
• Restaurants are closing, food delivery increasing.
• Demand is down but consumption is going up.
• Cell phone bills going down & internet penetration going up.
• Govt job creation decreasing & start up jobs are rising.

Coming to investments, investors need to realize that many dead stocks are being held in demat account.

Do you find any need of smart investing for your hard-earned money? Investors need to act, to review all asset class. Gold, Real Estate, Insurance policies, Fixed income instruments etc. Next action required is to transfer from passive investment style to active investment style.

Investor should be psychologically ready to give time to investment, to accept short term volatility and to ignore notional loss.

Hello investor is your forward looking friend. Hello Investor is the first place to start checking right place to rearrange your non-earning old equity investment into the promising investments

Always Remember “Managing Behavior is more important than Managing Investment”.