After graduation, I was pretty sure I wanted to learn more about Finance. My degree in Engineering Business Management while insightful about the two fields, completely ignored Finance on all levels and that made me feel inadequate. People think graduation is the end of learning and you should be equipped with all the knowledge you’ll ever need. Na boy, graduation is the start of a new journey and you need to learn more after, when the show is over, to make the next act better. As Warren Buffett says, “read, read, read…knowledge builds up, like compound interest.”
My life right now: wake up, head to the office , gym, read/reflect/write and 6-8 hours of sleep. I’m genuinely interested in learning and I pay special attention to the two Fs: Fitness and Finance.
I have come to idolise two men off late: Benjamin Graham and Warren Buffett (no less love for Charlie Munger either). Two books especially, have changed me so much personally, that I just can’t live life the same way; they are: The Intelligent Investor and Seeking Wisdom.
The point of this post is to share some of the things that should interest anyone remotely into finance and investing.
- How your investments behave is much less important than how you behave. You know that saying, where they say the whole universe is within you? It indeed is, critical thinking, patient confidence, discipline and courage can help you make the most of even worst bear markets. You really ought to not let other people’s mood govern your financial destiny. As cliched as it sounds, YOU control it.
- The future value of every investment is a function of its present price. The higher price you pay, the lower your return will be. Don’t buy into the noise, know the true value of what you’re getting into.
- You cannot eliminate the risk of being wrong, however, you can minimise you odds of error by the “margin of safety”- never overpaying, no matter how exciting an investment seems to be.
- People often forget what a stock truly means, hence the discrepancy in their goals and figures. It is an ownership interest in an actual business, with an underlying value, that does not depend on its share price. Don’t buy the stock just because there is ‘immense growth’, but because the business actually generates value, and you know is sustainable.
- You need to be a realist in times of unsustainable optimism and unjustified pessimism; simply sell to optimists and buy from pessimists. As Warren Buffett says – be fearful when others are greedy, and be greedy when the others are fearful!
- Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much loved hand. Most people, when they find themselves in a hole/trouble, keep trying to dig deeper in the hope to strike a jackpot, but they don’t realise that maybe, they should just stop digging. When you realise something was overvalued, is making losses and was not a good investment, get out of it, rather than hoping that it’ll get better.
Don’t be emotional about it, be rational.
I would include many more things that I learnt, but then I want to bombard investment jargon at you- I just wanted to share some of the core principles.
I’ve been thinking about writing a letter to Warren Buffett and Charlie Munger, just to let them know, that I probably am more financially secure, stable and aware because of their legacy. They make the act look effortless, and I just wish in the next few years, I can do the same continuing my pursuit of wisdom.
The thing is, that you need to become an active learner. You need introspection to realize what your wear points are, and work on them. I knew I was weak at Finance, so I grabbed books and resources to change that. Now I have a very balanced portfolio, that has well positioned me as a securities’ investor.
What you don’t know, you can learn- you just need the curiosity and the will to see you through. Good luck!