Lessons From Volatility & Life

I’ve learnt quite a great deal in the last 3 years of volatility in the Indian markets. I am lucky that I was 27 only when this volatility started. In this post, I try to reflect on how I have evolved as an investor and how I think about my money –

I Can’t Manage My Own Money – In the bull market, I was super confident that I have a great knack of picking the right stocks and make 20% per annum each year. I even factored 20% in the long term projections. I realized soon enough that I was swimming naked. Thank god for the bear markets early in life. I moved my money to managed funds. I have had less than 10% in direct stocks. The last two weeks were the trigger to sell out this 10% as well.

Keep Calm – I have experienced a lot of misery in my life. My father passed away just before my CA Final exams. My extended family has seen 5 more deaths after that. Life thought me that it’s not going to be easy. These events came with a lot more struggles. But time heals everything. All you got to do is wait. I have built enough courage over the last few years to wait for longer than expected. I think I can see the drawdown without taking any action.

Doing nothing works. All the time.

Personal Finance is the Key – I do not have the aspiration of getting rich early. I figured that you can live a good life with good financial planning. There are two key parameters to it. Asset allocation and rate of savings. The right asset allocation has always been 50:50 for me. This provides stability to my portfolio without big drawdowns. Rate of savings plays a huge role in creating wealth. 5% increase or decrease can dramatically alter your net-worth 10 years down the line. This is another key metric I like to follow.

Staying In Cash is a Hoax for a 27 Year Old – Market timing does not work. Ever. Instead, focusing on asset allocations, and re-balancing in case of big moves on either side makes sense. I do not want to do yearly re-balancing. Only when the equity portion goes up or down by 30%.

Focusing On Increasing Your Income More Than Finding The Next Multi-bagger – I was one of those guys who would google for multi-bagger ideas. I never found one. I figured that it makes sense to focus on the work you are good at and increase your income. I have been focusing on my job in the last couple of years. The higher my salary goes, the faster I achieve financial freedom. I am also working on creating other sources of Income. This might take time but it will help me have steady income five years down the line.

Never stop Reading – I hardly read till my early 20’s. I am very thankful to get exposed to the right kind of people who convinced me about the power of reading. I have never stopped since then. Tuesday’s with Morrie, When Breath Becomes Air, Rich Dad Poor Dad are few of the many life-changing books I have read. I am slowly updating the books I’ve read here.

I am sure I will not agree a lot of what I’ve written today few years down the line. My learning curve has just scratched the surface.

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