Why does one #save & #invest? If you understand answers to this question, you will look at your #InvestmentJourney in a totally different light.
A thread:
A thread:
You #earn through primary sources of #income like #salary & #BusinessIncome.
You have many #goals in your life like #education, #marriage, #retirement etc for which you start saving & investing
You have many #goals in your life like #education, #marriage, #retirement etc for which you start saving & investing
For achieving these #future goals, you start sacrificing on #current #needs, #desires and #aspirations.
Slowly & steadily, you nibble from your primary income, save & invest
Slowly & steadily, you nibble from your primary income, save & invest
What should be primary thoughts in your minds? First & foremost #protection of capital. If you become reckless and lose your capital on risky bets, you would have sacrificed on letting go of your present needs in vain and would not achieve your future goals as well
Here it worth remembering teachings of #WarrenBuffett:
Rule no 1 - Do not lose money
Rule no 2 - Do not forget Rule no 1.
Hard-core equity investor preaching this must have some deep meaning attached to it
Rule no 1 - Do not lose money
Rule no 2 - Do not forget Rule no 1.
Hard-core equity investor preaching this must have some deep meaning attached to it
Now, you have understood importance of capital protection.
#HarryMarkowitz in 1950s had said: " I visualized my grief if the markets went up & I wasn't in it - or it went down & I was completely in it. To avoid future regret I followed Asset Allocation"
#HarryMarkowitz in 1950s had said: " I visualized my grief if the markets went up & I wasn't in it - or it went down & I was completely in it. To avoid future regret I followed Asset Allocation"
What this means is respecting market signals and valuations of Asset classes.
Again, another teaching of #WarrenBuffett comes to mind: "be #fearful when others are #greedy & greedy when others are fearful"
This will ensure #AssetAllocation, which contributes to 92% of returns
Again, another teaching of #WarrenBuffett comes to mind: "be #fearful when others are #greedy & greedy when others are fearful"
This will ensure #AssetAllocation, which contributes to 92% of returns
Another quote of @morganhousel comes to mind:
"Being conservative is avoiding certain level of risk. Margin of Safety is raising odds of success at given level of risk by increasing chances of survival"
"Being conservative is avoiding certain level of risk. Margin of Safety is raising odds of success at given level of risk by increasing chances of survival"
Mutual Fund Industry has bracketed investors as #Aggressive or #Conservative & recommended asset classes based on this. History shows, most aggressive becomes most conservative when markets go against them.
Bracket yourselves as #rational or #irrational investors
Bracket yourselves as #rational or #irrational investors
Rational investors would not have chased returns, followed Asset Allocation, sat on cash for some time, waited for right opportunity & invested heavily at best valuations (market corrections). Irrational investor would have exited during corrections & invested in euphoria
When one starts to chase returns and past performances , there will always be erosion in their wealth creation going forward.
Excesses of markets on +ve & -ve side will revert to mean & markets will deliver +/- #NominalGDP (#Inflation + #GDP) kind of returns.
Excesses of markets on +ve & -ve side will revert to mean & markets will deliver +/- #NominalGDP (#Inflation + #GDP) kind of returns.
Then if your portfolios is delivering steady 12% to 14% CAGR, be #happy, #satisfied & #content.
If you have #FOMO during #euphoria times, rest assured one will repent at leisure during correction times.
If you have #FOMO during #euphoria times, rest assured one will repent at leisure during correction times.
Remember, in #Life & #EquityMarkets, there is always that next bus. In Equity, if you have missed one, catch the next through #AssetAllocation - do not have #FOMO @IamMisterBond
Buy & Hold can work only when you have the ability to stay calm even during 50% #MarketDrawdowns & are sure that you will not become #irrational and exit at best valuations.
Otherwise, focus on #AssetAllocation, respect #MarketSignals, create #MarginsOfSafety -rest follows
Otherwise, focus on #AssetAllocation, respect #MarketSignals, create #MarginsOfSafety -rest follows
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