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Money management is one such skill that several people are unaware of. 16 Personal Finance Principles Every Investor Should Know helps learn how to. 16 Personal Finance Principles Every Investor Should Know book. Read 6 reviews from the world's largest community for readers. 16 Personal Finance Princi. 16 Personal Finance Principles Every Investor Should Know. eBook on Personal Finance. Uploaded by. anon · Be Your Own Financial Adviser.
At some point, branches begin to emerge and grow in all directions. Coming back to the example, your wealth at the end of the 10th year will grow to Rs So visualize your Money-Tree; it has become bigger and its worth Rs What happens after 1 more year, i. How much more will be added to this Money-tree? There will be 2 kinds of additions. The first one will come from you, which is Rs 5, per month or Rs 60, per year.
The other part will be the return generated on the wealth that has already been accumulated. This turns out to be around Rs 1. So the total addition in the 11th year will be Rs 2 lakh, out of which only Rs 60, was due to your contribution and the remaining Rs 1.
Now, if you consider these two branches, the branch which is a result of returns generated from the existing wealth will be much much bigger than the branch which you contributed afresh. I guess you got my point here. Now, if you fast forward to the 29th year, your corpus would increase to Rs 1. And that would be close to Rs 18 lakh!
You can actually skip contributing that 60k in last year and it wont really be missed. The best part has happened already, which is the accumulation of wealth in the early years! The take-away You will agree that the money you invest early in your life has a drastic effect on the money you accumulate over the years. This is true for long term investing. But if there is no long-term, there is no time for "compounding".
Time is a great ingredient and everyone has a good amount of it.
If you loose time at the start, you lose wealth. Jeffrey Kennedy. Steven D. Bear Markets.
David Kauders. June Inherited Wealth, Justice and Equality. Guido Erreygers. Making Lemonade.
Martin Mazorra. Personal Finance for Millennials: Learning Financial Budgeting and Proper Investment. Dueep Jyot Singh. Safe, Debt-Free, and Rich! Andrew Packer.
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Chi ama i libri sceglie Kobo e inMondadori. download the eBook Price: Choose Store. And, each and every opportunity or chance to save more or contribute more, means a lower burden later. Now lets look at how this applies to wealth creation Suppose you and your friend start your careers at the same time and have 30 years in hand before retirement.
He would collect Rs 1. Now, lets say you start investing the same amount per year but 10 years later, thinking that you will apply some smart investment strategies which give you a much higher return.
However, your friend's life will be a lot easier If you are a conservative investor, early investing is more than necessaryits critical. You should see early investing as a "strategy" rather than a "fact" for your investments. Investment table Formulas scare everyone. So, Im putting down a table as a ready reckoner for how much you can generate by investing some amount for several years at different rates of return: Table 1: Its very simple to use this table.
Table 2: Now suppose if instead of a one time investment, you decide to keep investing some fixed amount of money in a particular instrument every month. Heres a table which will tell you what you will have amassed over the years, i. Early investment can help you enjoy semi-retirement Now Im going to touch upon one of the most ignorned aspects of early investing.
I dont see anyone talking about it in the personal finance space. For how long do you want to keep working at your job? Till you are 60?
Dont fool yourself! A lot of people are forced to work till their retirement, battling daily pressures only because they are suppose to bring home money to provide for the family, year after year.
By now you know that if you invest early in life and utilize the time to compound your money, you can rest assured that the money starts working for you. This means that in the later years of life, you get freedom from worries about contributing each month to that big wealth pool.
If you do it in the right way, you could even enjoy a semi-retirement. Semi -retirement is nothing but that phase of life wherein you dont stop working, but definately stop worrying about money. You can take up some light job or some consultancy work, which gives you enough time to enjoy your life while some money still comes in.
If you want to retire at the age of 55, you can semi-retire at the age of 45, atleast. Just recall the initial part of this chapter where we saw how early investing gives you the freedom to exempt yourself from contrubuting too much at the end. Thats exactly what you can do and as a result, there will be less pressure to earn a lot nearer your retirement. Even if you are earning less, your money takes care of itself.
Book Review-JagoInvestor:16 personal finance principles every investor should know
So take action towards contributing more at the start! So, at the risk of sounding repetitive, let me neatly wrap things up for you with three conclusions which capture the essence of early investing and explain what exactly happens in the process. Conclusion 1: Even if you cut your contribution at the end of the tenure, it wont affect the final corpus drastically. When you see a huge 30 year old tree, in which part of its entire life do you reckon it required the most amount of care and nutrition?
Its always the initial years during which the roots have to take hold. Its also the initial years in which a plant is most vulnerable to weeds and bad weather. Once it has safely made it past the first few years, you can leave it to grow on its own; the tree will be able to extract nutrients from the soil on its own.
It wont hurt if you forget to water it once in a way. In fact, theres a good chance that it doesn't need your care now; it has become so big that it can expand and grow well. Hence your contribution does not matter much at a later stage. Something very similar happens in the case of your investments.
The initial period is very critical. If we take care of it very well at the start, later on we can achieve good results without actually putting in much effort at the end, in terms of contributing money. Naturally, effort in terms of analysis and monitoring will still be required. Just as an example, if you invest Rs 5, per month for 30 years lets suppose you wish to build up a fund for your retirement , you can generate around 1. Now what happens if you do not contribute anything in the last 10 years?
At the end of 30 years, you will still accumulate Rs 1. If you do not contribute for the last 15 years? You will still make Rs 1. Heres a chart which shows the percentage of corpus generated when you do not contribute anything for a certain period at the end. Its no magic; its pure maths and compounding. Whether you lose the last 10 years or 15 years, one thing remains certain, you have put in enough effort in the start and then given sufficient time to your investments to grow.
Heres a table which gives you the exact corpus generated and what proportion of the original corpus it forms when you don't contribute in the latter years. Number of years without contribution at the end of a 30 year period. Conclusion 2: If you reduce the length of your tenure substantially, the additional amount you need to invest to create a corpus of a particular size does not increase drastically.
Naturally, it depends to some extent on how much you have shortened your tenure by. Now, this indirectly tells us that if we increase our investments by a small amount, we can still reach the same corpus.
For instance, lets say you need to invest Rs 5, per month for 30 years to reach a target of Rs 1. Now suppose you do not want to make any investments for the last 15 years, but are willing to leave your corpus to grow. All you need to do is increase your investments by Rs per month and invest 5, for 15 years instead of investing Rs for 30 years. This will make sure you reach your targeted corpus. Here are some other situations in which you can reduce the tenure of your contribution, without impacting the amount of your final corpus, simply by increasing each contribution marginally.
Years without contribution. Conclusion 3: Investments made in the initial years form the main chunk of your final corpus The investments that you make at the beginning get sufficient time to grow and compound drastically over the years.
Using the same example, take a look at a chart which shows you how a huge part of your final corpus gets built because of the investments made in the initial years.
Which again shows that early investing is so critical for wealth creation. However, do remember that the above conclusions hold true only if we have a total time horizon of 30 continuous years.
If you discontinue your investment in between, the above will not hold true. Your next best alternative Now dont be disheartened if you have not yet started contributing towards your future.
Its always earlier than tomorrow and investing today will give your investments a chance to grow in future, irrespective of how long or short that future is. The main principle that you need to follow is invest as much as you can todaydont put it off for later! Heres what you can do to maximize your investments today.
Take a closer look at your life and you will find several ways in which you can generate more money to invest.
A few suggestions which come to my mind are: Cut out on unnecessary outings once in a while 2. Try - to use a bike instead of a car, if your situation permits it.
I see many people using 4 wheelers when they can do just fine with a 2 wheeler! download a smaller car instead of a bigger one, if it doesn't hurt your ego. Change to a prepaid mobile instead of a postpaid this works out well for a lot of people 5.
When you go shopping, write down what you want and calculate approximately how much it will cost you. Then carry that amount of cash, with a small margin, perhaps.
Walk or ride a cycle when you want to get to a place thats relatively close; dont become a slave to two wheelers or cars Any small savings undertaken and invested today are going to have a huge effect later. The stronger your focus is on investing more at the start of your life, the bigger will be the relief you can expect later.
But the focus is on discipline and not on getting bogged down by short term deviations, which are bound to come along the way. Final Thoughts Make sure you dont overdo your belt tightening exercise and start cutting down on those things which make you happy.
The whole idea is to look at increasing your investments by cutting down those costs which are relatively dispensable.
You dont have to and should not compromise on todays life to build a great tommorow. The whole idea was to motivate you into early investing and show you what it can do for your financial life. Flashback Learning Investing more money in your initial earning years will make sure that you quickly build your corpus and it eventually grows without your support Investing more later is the same as investing less today; the choice is yours!
Dont lose time. Identify all the areas of your life in which you can cut down on costs, without compromising on your current lifestyle and find out how much you can save. Find out how much money you are able to additionally save per year and what kind of additional wealth it can generate for you by the time you retire.
Finally, your journey through this book has come to an end. While reading it, you have certainly come closer to your tryst with wealth. Although you are motivated and all charged up after reading all the eye-opening insights that you have come across in the book, you have not reached your goal yet.
There are 2 things you still need to do: Smart investors are early investors 2. Secure your life to ensure peace of mind 3. Clear goals leads to clear direction 4. Use Equity for long term goals, Debt for Short term goals 5.
Instead of asking how to, ask Do you want to or not 6. Simple financial life is awesome financial life 7. Focus on earning more rather than saving tax 8. Simply put the First things first not second or third Invest in yourself and not just in financial products If your financial life is your business, then you are the CEO Personal finance Short cut ends up to be long cut Always Educate yourself to educate other family members Focus on bigger picture rather than small things Spend on what you really need, not on what you think you need Look at Value not the price.
I came across this book and especially about Jagoinvestor initiative accidentally.
Yes accidentally, and may be that it was to happen with me. The reason to say this is because then I also found out about this book the old edition and that time onwards things changed and every day was like an awakening as I was reading through each chapter of the book carefully. Every chapter has made me think about not only just financial aspect or wisdom but also about the other parts of life. First and foremost things that I did was to ensure that after each chapter take the action and then only read the next.
This compelled me to do the things. This has lead me to download online term insurance plan, I know it may be late to do it for me but I have started. Each chapter has a good elaboration of ideas, but what I like most is it has provoked me to think an do things and made me take actions and that is what I can say is a success of this book is, no matter how many copies are sold or others readers may find it find it very basic.
However I personally feel that basic principles only takes one ahead in life. It also made me write my finacial goals now I dont know what will be the result but atleast the journey is started.
It also made me share important financial information with my family big smile here.
This also made me consolidate all informaion of where things are in one place and organized them.At-times before investing we do not even consider how long we plan to invest! Enhanced Typesetting: Marcia R. Documentation management or paper work is a topic very close to our heart. Simple portfolio pg is one of the greatest take-away from the book.
With the help of examples and stories, it can easily explain the principles of personal finance in a step by step manner. Simon Watkins.