With qualifications like ICWA and MBA in Finance, Priya Krishnamoorthy took corporate life head-on as she spent 8 years at one of the topmost Information Technology multinational companies in India.
With her family, trekking groups, by backpacking with friends and with a corporate grassroots awareness program, Priya has covered a lot of India since she was 7 years old. While at her job, she's been excellent at negotiating for leaves to make her travels happen.
Despite being successful at her job, Priya yearned to be an entrepreneur and find more time for long term travel. After supporting her husband to pursue his shot at freelancing, Priya too took the plunge and quit her job once they were financially abundant and when the two decided to travel around India for a year on their own plan, without help from any travel companies.
Nowadays, Priya is enjoying life with her husband as they pursue ideas on self-planned travels, entrepreneurship, passive income and how to get better at life. She writes about her learnings in this blog. Besides she also looks for regular people who found inspiring success and writes their story in the Hero's Journey section.
I had read this book a long time back and decided to re-read it now. It is surprising how many insights I received in the process. So I have decided to summarize this classic and follow it up with all the books in the series.
Only Rule For Getting Rich:
Know the difference between Assets and Liabilities. Buy Assets.
An Asset is something that puts money in my pocket.
A Liability is something that takes money out of my pocket.
As someone from an accounting background, for a long time I was resistant about the above definition. But now when I am training myself to think like an investor, this is the only definition that makes sense. The only practical way to evaluate opportunities.
Mind Your Business:
Your profession is not your business. While working your day job, work on a side hustle, a business that you can create an asset for you over the long term.
To Become Rich: Obtain Financial Intelligence
Financial IQ is made from four broad areas of expertise
Rich spend time understanding the above and use it to their advantage to retain the money earned by them.
Financial Literate but not Rich:
Five Reasons why a Financially Literate person is not Rich:
Personally I think, it is just Fear, which wears different masks. Like the Fox that called the grapes sour, we express our Fear in different ways such as cynic (disbelief, to avoid taking action), Laziness (Fear of rejection disguised as Laziness), Bad Habits (Not following through), arrogance (Ego+Ignorance)
Rich Invent Money
Rich take calculated risks, where they have a big probability of winning with limited loss (Stocks/Options), or a small probability of winning with massive gains (Eg: Venture Capital)
Work to Learn: Don’t work for money
Look at your Job as a place to learn and hone your skills, rather than a way to earn a living. Your focus will be how to make yourself a better version of you which would automatically make you a more valuable employee, if you are learning on the job skills.
Even if you have read the book before, I suggest you to read again. This is one of the books that grows on you and gives you new lessons as you step up your game.
We read that “Great Leaders are Great readers.” So we set up new year resolutions that say “I will read at least 10/20/50 books this year“. Some of us even get to that number, but often we look back and can’t seem to remember any ideas from a book we really enjoyed reading and thought was great.
Most productivity Guru’s can’t list the ‘seven habits’ from the cult book, ‘Seven habits of highly effective people’ although they have read it several times and even train others on them. So how do we ensure that we not just read a book, but actually remember what is in it and make an impact in our life.
What to read?
The discussion here is relevant to non-fiction reading.
(1) Read with Purpose
Do not pick a book, because it has less pages, available in kindle or your library for free or even for the reason it is popular. Read it because you wanted to learn something from the book, that is relevant to you right now or in the immediate future. A book about what makes an ideal CEO is not relevant to you now, when you are a desk clerk. You can read that book when you are vying for that job. A book is a commitment for your time, several hours, make the investment worthwhile.
(2) References and Suggestions:
References from books that you have read and liked are great places to find books that you want to read to deepen your understanding on the topic at hand. People in relevant industries can also be a great source for suggestions. Have a list handy, and never run out of books to read.
(3) Read the book reviews/summaries to determine whether the book is relevant to you before buying them. If you haven’t learnt anything in th first 50 pages, discard the book.
What to Avoid:
(1) Information Overload:
If you are looking to start a business say export or media, read a handful of highly recommended books to get a overview of the business and get into action when you think you have a fair idea. You will never be sufficiently prepared and you will make mistakes and learn on the go. But if you try to read every single book in the market on the subject before you take any action, you are probably just using additional information as a crutch to postpone taking real action. Start with what you have and improvise.
Unlike spending time in a chatroom or social media, reading a book requires a fair bit of focus. Allocate a dedicated time of the day, even if it is just 10-20 mins to read without distractions.
Research says multi-taskers perform worse than drunk people on cognitive tasks. We have all been the kid (at least I have been) who insisted on writing the homework in front of the TV and ultimately finished it under the school desk when teacher comes checking. If you are serious about the topic, avoid multi tasking. Listening to audio books while driving is still okay because of this.
How to Read:
(1) Skim the Book:
To start with, skim the book, look at the index, read the intro, see the info graphics, quotes and get a fair idea of what the book is about.
Read the Headings, sub-heading and write down the questions that arise in your mind on reading that. For Ex: Rule 1 of Rich Dad, Poor Dad is that “Rich Dad don’t work for Money”. Here the question in my mind is, “So what is it that they work for?” List down your questions from the activity of skimming.
(3) Read to answer the questions you have noted down. Skip topics that you are familiar with already. For eg, case studies, research conclusion, stories that you have already read in greater detail earlier.
(4) Highlight and annotate with symbols ( $ for value, “” for quotable quotes etc) relevant points that you will want to come back for reference.
(5) After finishing every chapter, spend 30 sec to mentally review its contents in your head. You may also write a 2 line summary.
(6) If you are unable to recollect any of the points during review, go back and read the relevant portion only.
(7) Write a short summary at the end of the book after finishing it.
How to Remember:
(1) Use Acronyms:
Dan and Chip Heath are great at using an acronym to put their ideas together. For their book ‘Made to Stick‘, they used the analogy, ‘SUCCESS’, for ‘Decisive’ they used ‘WRAP’. This makes it far easier to recollect the main points in the book.
In the movie, ‘Evan Almighty‘ the director even when all the way to make ‘random act of kindness’ into ‘Act of Random Kindness’ to fit the acronym of ARK. That’s how powerful an acronym is.
(2) Use Analogies:
We have studied the earth to be a sphere/ball, the electrons move around nucleus like planets revolving around sun etc. The analogies help us form a picture of what we don’t know through what we know and can be a great tool of understanding.
(3) Use Feynman technique:
Teach it to a 5 year old. Remove all jargons and simplify the concept so much that you teach it to a 5 year old or even better babies 🙂
(4) Think through and discuss:
When I thought of this or any topic to write, I usually find enough ammunition to write from just one article or a video. But when I refer multiple videos or articles and combine them together into coherent post becomes a bigger task than transcribing one video. But this is the one way through which I am able to contribute to the post as well absorb the maximum about the topic at hand. So think through the topic after collecting various facts, opinions and discuss or write about it to imbibe understanding rather than just parrot what you heard.
Nothing makes you remember a topic, as much as when you implement the learning from it at the earliest. Since we have already picked a topic that is most relevant to us, it should not be too difficult. Is it a cook book, go try one recipe, Is it a book on Yoga, schedule your Yoga session, Is it a book on social conversations, ‘Say Hi to the stranger and try out some tips you just learnt.’
It’s not what you get out of the book, its ultimately what the book gets out of you that matters. So read something that matters, think through it and get the ball rolling.
This could be a million rupee question based on what is it you intend to buy or rent? In this post I’ll try to cover various category of assets and both financial and non financial aspects of this question.
Immovable Assets :
For Most of us, the only immovable asset we will own is our home or utmost a piece of land. We have all been told stories of how somebodies grandfather bough a tiny piece of land several years ago for a tiny pittance, far away from the city and lo right now it is the heart of the expanded bustling city, fetching several crores. We feel inspired by the story and go home hunting.
Pro’s of Buying/Con’s of Renting:
EMI’s enable an automatic saving month on month. So if you are a spend thrift, this might just be the kind of commitment that you require.
Appreciation of home prices is huge plus. We lock in on the prices at time of booking and can enjoy the appreciation that comes with the property. There are stories of people who pre-booked apartments in metros with a token amount of 1 Lakh, flipped it over during the time of possession and made several times their initial investment. Personally, I think times of such appreciation for real estate is long gone.
Provides a sense of comfort to be able to choose the schools and offices/business nearby for long terms.
Flexibility in decorating/modifying the house to exactly fit our needs.
Con’s of Buying/ Pro’s of Renting:
The pressure of monthly EMI’s have killed many brilliant startups even before they started. So if you are planning on a change of career, starting up on your own, managing cash flows with huge EMI’s can be a big detriment.
Land or property needs good maintenance over a period of time making it one of the most difficult assets to own remotely. Frequent Cleaning can cost as much as one time clean up cost of unmaintaned flats.
Laws are fudgy and weak to implement. One can practically do little to evict delinquent renters from the property.
Carry costs such as property maintenance, homeowners insurance, unexpected repairs are often ignored.
Even though you may enjoy the appreciation in the property, interest paid is a huge opportunity cost. The increased square foot rate in the area may not translate into gains for older properties.
Property appreciation is not guaranteed. New structures such as Flyover near the property or alternate highway cause the prices to fall down. Govt. acquisition for infrastructure or expansion projects can not be ruled out either.
Real Estate – My Opinion:
While increase in prices, may be a good plus for property, no non financial asset should be purchased solely for investment purpose. Would living in this house enhance the quality of your and your family members for the next foreseeable future(like till children finish school), if so go ahead and buy it. But moving out of the city, increasing the everyday commute time to work, increasing your financial burden solely to have your name board on a piece of property may not be a wise idea.
Remember most people, websites and experts that convince you that buying is unequivocally good are trying to sell you something.
Movable Property Aka Vehicles/Furniture:
In today’s era, it is very easy to rent a bike/car and even furniture and appliances. So if the supplier is making money by renting it out or we losing money by hiring it? In the long run, is it cheaper to buy or lease?
Pro’s of Buying/Con’s of Renting:
Removal of dependency on some other service provider or person like a drop/travel in emergency.
When Furniture/Car/Appliance is used for throughout its life time, it makes more economic sense to buy. For example, Fridge compressor come with a 10 year warranty, Teak Furniture like Beds, 20 year warranty mattress can last a very long time, even decades. To pay a fixed rent for such a long time makes no sense. Classic limited edition cars even go up in value.
While I can leave my car dented as long as I want to, I have to compulsorily pay a penalty for even cosmetic damages in a vehicle I have rented for a short while.
Con’s of Buying/ Pro’s of Renting:
In Mumbai atleast, I have seen people change furniture every few years and want to be trendy, unlike south where most furniture only play a utilitarian role. So for the fashion conscious homes can consider renting rather than going through the hassle of buying and reselling furniture year on year. The same goes with the car too. It is easier to upgrade to higher end model when you are renting it.
City commute is best in a hatchback, Sedan is useful on long trips and SUV’s are the go to for both family trips as well adventure trips. We do all of this in a year, and we can without having to compromise or own so many cars by renting all or buying the most frequently used and renting the others.
Bike rentals have made commute possible in many places like Goa, Rishikesh,Manali and Leh in India. The bikes are well maintained and available with minimal documentation, allowing us the comfort of flying to our holiday destination as well as commuting on our own locally.
In a temporary posting of two/three months, it is beneficial to rent all the furniture and appliances along with the house.
Temporary needs like A/C or Air Cooler during peak summer may be more cost efficient than buying.
Can be added quickly for temporary requirements like temporary live in guests for a few months.
Movable Assets – My Opinion:
In general, depreciable assets are best paid for on usage basis unless the pay as you go options are disproportionately costlier compared to their buy price or have heavy usage. With advent of numerous startups, everything is on hire at a reasonable price. We are lucky to live in era with so many options and we should make the best use of them.
Any asset, or item that is bought with the view of making money from it or is central to the running of your business may be considered as a Business Asset. This could be a second home bought for rental income, a shop for own business, vehicles for the purpose of renting out etc.
“An Asset is one that puts money in your pocket.” – Robert Kiyosaki
Does yours, even if not immediately, atleast soon enough.
Location dependent businesses like restaurant, salons where primarily your customers come to you because of proximity should either enter in long term leases or own their property to avoid sudden increase in costs. Elimination of fundamental risks to the existence of business warrants additional expenditure. However do not take this step in the initial days when your idea or business is still unproven.
Conclusion: Buy or Rent
The choice of buy vs rent depends on preferences and usage patterns. Buying is a high/medium impact decision, when compared to renting which is a low impact decision. The Startups that rent out these assets/services ensure optimum utilisation of the assets and is truly a Win/Win situation. Today’s thriving startups have filled our life with plenty of choices. Choose Well. Choose Wisely.
When I was a child, No one just asked us “Who is your favourite actor?”. They always asked Do you like Rajinikanth or Kamalhassan? Our prime time debates with panels were of topics like: What is good: Nuclear Family or Joint Family? Or Who is the better warrior – Arjuna or Karna? We were expected to pick a stand and argue our best. We spent considerable time arguing over these topics without ever having one person to our side from the other.
In ancient times, the question was like – Who is the more powerful God – Shiva or Vishnu? Today the questions have just been modified and become – Who is a better cricketer – Dhoni or Kohli ? or Who is a bigger star – Sharukh or Salman? Continue reading Choices and Impact
Warning: This book is an advanced read even for finance professionals. You must have basic knowledge on capital markets to be able to understand and appreciate the book. Like high echelons of Carnatic music, this book is a God send for those obsessed with return on and of their investment, but most others may be unable to appreciate the finesse of the mentioned points.
This book is one of Investment Classics vouched by none other than the most well-known investor of our times Mr. Warren Buffett. Most revelations in the field of investment lose relevance overtime and even prove dismal in succeeding cycles, as can be seen in some of the commentary by the supplementary author Jason Zweig (more on that later) but Graham’s principles have themselves have survived several market cycles. Infact these principles thrive on the market cyclicality. So let’s go about to explore the voluminous book.
Speculation Vs. Investment
A shareholder is a part owner of the company and has to study the business fundamentals thoroughly before deciding to put his money into it. The investor must be convinced that he is receiving more value of the company for the price he is paying. Purchasing shares with the hope that it would increase in price is speculation. A non-professional who is speculating on share prices is purely gambling. It is an exciting past time worth being pursued with only a small portion considered as fun money which you are okay to loose.
Investor’s Biggest Enemy- Inflation
A good investment must deliver an inflation beating return with an acceptable level of risk. Graham considers bonds (debt securities) as one of the most important vehicle to achieve the same. Since secure return of principal is of prime importance, Graham prefers Govt.bonds over corporate bonds as there is nil risk of default by the Government and a few additional points from corporate bonds do not justify the additional risk. However, Graham recommends buying bonds of corporates when available at a steep discount in the secondary market due to temporary adverse conditions faced by the company or market.
Two Types of Investor – Defensive and Enterprising
Myth in investing world is that you have to take higher risks to obtain higher returns. According to Graham higher returns go to the investor who actively pursues it, i.e an enterprising investor while the passive or defensive investors get average returns.
Between stocks and bonds, Graham recommends a minimum of 25% and a maximum of 75% allocation on each of them. Only investors who are prepared for a huge draw down(notional loss on quoted price) should allocate 75% on stocks at any point in time. Conservative investors may be better off with maximum allocation on bonds.
Rules for Common stock Component
There should be adequate but not excessive diversification. i.e a minimum of 10 and a maximum of 30 stocks.
Each of the selected company should be large, prominent and conservatively financed.
Each company should have a long record of continuous dividend payments of atleast 10 years.
Set a limit to max price one would pay for the stock. Suggested: Trailing 12 months PE of 20 or average of 25.
Graham in general advices against picking stocks individually as he considers an individual cannot do a better job at stock picking than the professionals who seem to do a pretty average job themselves. His preferred way of investment in equity is through index funds.
For an enterprising investor who is willing to put in more efforts into stock picking he advises following guidelines:
Financial Condition: (a) Current assets at least 1.5 times current liabilities and (b) debt not more than 110% of net current assets (for industrial companies)
Earnings Stability: No deficit in the last five years.
Dividend Record: some current dividend
Earnings growth: Last year’s earnings more than of prev years
Price: Less than 120% of net tangible assets.
Dollar(Rupee) Cost Averaging:
Such carefully selected stocks must be purchased through a monthly purchase plan of a fixed amount every month as long as the basis premise of selection holds good.
Portfolio Tracking and Updation:
The portfolio must be reviewed atleast once a year. But frequent urge to check the stock prices must be avoided.
Graham is extremely critical of companies that retain more earnings than required for growth. For the company managers to believe that they are more qualified in growing the retained earnings than the shareholders is incorrect, unproven and misaligned incentives.
My Critic on the book: The commentary of the book by Jason Zweig adds number of recent examples. However, the commentary is dated only till 2003. So the book completely skips the 2008 crash and the lessons from it. Jason Zweig has also recommends investing in junk funds as he says risk has been significantly reduced due to diversification. Diversification does not do away with systemic risks which while adequately addressed by Graham need to continue to be adhered too.
This book is a great read if you want to understand more on Asset Allocation in capital markets. For more in depth knowledge on picking stocks please read ‘Security Analysis‘ by Graham and Dodd.
We have all wanted to learn new skills like painting, singing, playing an instrument as an adult when we do not have the luxury of attending series of classes or the 10,000 hours as claimed by several. It is not so hard and even some life skills like swimming, driving can be learnt in as low as 20 hours. In this post we discuss the method for acquiring a skill at an amateur level at the shortest possible time.
Step 1: Define Success
A clearly defined goal is the starting point of the journey. Don’t start with more than one skill or goal.
Eg: 1) To be able to type 60 wpm using a qwerty keyboard with not more than 3 mistakes.
2) To be able to do a portrait sketch in pencil with reasonable semblance.
3) To be able to play ‘chinna chinna asai‘ song in my keyboard with correct tempo and tune.
4) To be able to swim across the 50m pool in freestyle without stopping
5) To be able to park the car in any parking lot properly
You can always build upon your knowledge sequentially, but it is important to do it only one at a time. Once you have reached your goal, you can give yourself a tougher goal in the same skill, or move on to a different one, as you choose.
Let us also address, motivation issues here. Learning a skill is hard, a goal with a purpose often works better than learning for leaning sake. For Eg: I want to learn conversational Gujarati so that I can talk to my fiance’s parents when I meet them in 5 weeks works better than I want to learn Gujarati.
So let your goal be,
“I want to learn ___________ in ___ time, so that I may ________”
Step 2: Deconstruct the Process
You may have noticed swimming, driving classes for absolute beginners are for about 20 hours in general. In 20 hours they are able to take you from someone who has never been inside water to be able to swim reach from one end of the pool to another, or in case driving as someone who has never been on driver seat to be able to handle from the highways to the chaotic Indian roads.
Josh Kauffman in his research as found similarly that learning any skill can be done in 20 hours.
You are by no means going to come out the other side as the next Michael Phelps or Michael Schumacher but would have learnt just enough to survive the roads or the water.
Any skill involves a series of steps. so first we need to deconstruct the steps. For example, the goal of swimming across the pool would involve mastering steps like:
Landing a Jump
Step 3: Select: Identify Key Components
Pareto’s rule of 80/20 fits well into this context i.e 80% of your learning is going to come from 20% of your components. The most important components for the considered Goal according to me would be
So from about 10 + components we have identified key components that we will focus on for our 20 hours of learning. For critical skills like swimming, driving etc which can endanger your or other lives when not practiced properly, it is preferable to have a trainer or atleast an experienced person around you while practicing. But for all skills, it is beneficial to have a trainer, who can provide good feedback and prevent you from practicing incorrectly. But professionals can at times impart incorrect/non-beneficial industry practices that does not suit your lifestyle or goal. You may notice that your driving methods resemble a lot to the person you have learnt from. So choose your trainer well.
Step 4: Sequence the Learning
In pencil sketching, the learning would start with choosing the right HB Pencils, holding the pencil, lines and then shades.
Similarly in swimming, one has to learn to float to be able to get over the fear of drowning, then combine it with learning of hand, leg movements and breathing to be able to swim. Each of this can be identified as a sub skill and learnt and until it is reasonably mastered.
Step 5: Plan for failures
Visualizing that you have failed and to find out reasons for failure is one of the easiest ways to find out where we may fall before we even start. Pre-mortem your result and identify the weak links that may have caused you to fail and account for them in your practice. You may be too lazy to pull the guitar out to practice, put a stand near your favorite chair. Your partner may get too busy to practice salsa, find an alternative. You’d be too lazy to follow through and finish lessons on your Gujarati, schedule the sessions with your tutor and pay for them ahead of time. You think you might put off learning cooking again – Invite your friends over a home cooked dinner at a scheduled date. Websites like StickK can really help you in sticking to your commitments.
This is the most important stage of the learning, where the initial enthusiasm of learning a new skill can quickly get replaced by the frustration of not making a progress fast enough. This is why the purpose of the goal that we mentioned in planning stage is very important. While our tactics will help you get through it in record time, it is still going to be frustrating and will need the purpose powered willpower to drag you through.
Short spurts of learning (say 20 mins) before and after your bed is the most efficient time for you to learn. While this can be definitely used for learning a musical instrument, language, typing etc it can understandably be difficult to learn swimming or windsurfing if your practice area is not in your vicinity or if the industry only provides standard slots like flight log or scuba. Go for the next best alternative.
Set up low stakes Environment
This might sound contradictory to the high stake target we set for ourselves. But it is not. For practicing set up a low stakes environment where you can fail without hurting yourself much. Start swimming in shallow waters, practice uni – cycling or bare foot running in soft grass, practice the new language with non-critical native speakers, try rope walking at a lower height or trapeze with the nets underneath.
Practice – Repeat – Commit to 20 hours
20 hours is not a lot of time. Most of us might watch more TV than that in a week. But this 20 hours may seem excruciatingly long, while practicing and miserably failing along the way. But do it anyway.
Monitor progress – Get Feedback – Get better
Have sub goals and timeline for the sub-skills that you have to develop and allot a time to integrate them. This will be no different than assembling a car, while each part that goes into making the car is quality checked on production or purchase, assembling it together will also take time and due steps need to be followed.
Keep realistic timelines for your sub- goals and measure your progress against them. Seek feedback and help as required to adjust your process and routine to help you get to the finishing line.
Taking care of Basics
I was tempted to leave this part, but it surprised me how many people mentioned this as one key part of learning that I couldn’t help but putting this in a separate section.
Over 70% of the body is comprised of water and water play a huge role in helping to regulate nervous system and brain function. All the learning experts swear by the need to hydrate oneself well while attempting any learning exercise.
Regular exercises benefits your brain as much as it benefits your body. A fit mind in a fit body. So lace up and get going.
Schools, the hub of education has taught us what to learn. But has surprisingly never taught us ‘how to learn’. So often kids with different learning requirements are labelled ‘slow’ than find compatible teaching methods. No wonder Einstein, Edison, Graham Bell were all labelled ‘learning challenged’.
We have all known people for whom things always fall into place at the right time and right place. These lucky people meet their future spouses by accident, they get a brilliant business idea from a random conversation, strangers seem to help them everywhere they go and they get introductions and guidance from the most unexpected places and people. We have all heard stories like the FEDEX founder who gambled with the last $5000 in the business and won enough to save the business and thrive. Life is full of fortunate coincidences for these lucky people.
The Everyone Else: Unlucky
They are also the other kind of people for whom bad luck and misfortune follow everywhere. After a long wait and much trying they scheduled an appointment with a big prospect who had to cancel due to an emergency, the stocks that they invest in fall, the parking fills up just before they come, the traffic lights turn red on seeing them, they loose their valuables routinely, they don’t get the big breaks they think deserve despite their talent and hard work. The many like the talented Vinod Kambli who despite his superior batting talent had a short career unlike his friend who went on to become the little maser.
Brain is the most important and vital organ in our body. Unfortunately, numerous modern age practices have taken a toll on our brain. But it is not only possible to reduce the aging of your brain, it is even possible to reverse the aging effect i.e get younger. The good thing is none of them are terribly difficult to do. Let us look at the the 10 things we need to practice to keep our brain young.
1. A Good Brain Diet
Brain needs numerous nutrients esp Omega 3 to keep it healthy and running. These nutrients are found in plenty in foods like Walnut, Avocoda, Brocolli, Bluberries etc. Eggs and Salmon Fish as well for those who eat them can be extremely good supplements for the necessary nutrients.