Investment lessons everyone should know 1. The earlier you start the better, but today is surely better than tomorrow. 2. Your total return depends on how much return you get on each portion of your portfolio. So if 10% of your money is in equity, it hardly matters whether you get 10%, 12% or -12% on your equity portfolio. The overall impact of this is, 10% – that is all. 3. Compounding worked for your grandfather, father and it will work for you. Do not spend 20 earning years wondering whether compounding will work. It does. Inflation is negative compounding, and that works too. 4. Compounding makes you rich, but compounding takes time. Sigh. No easy road to Wealth, immaterial of the forex trading, commodity trading, real estate ads that you see in the media. Remember today media means ‘paid media’ – so even the articles are biased. The current flavor is ‘why real estate is far superior to equities’ so true!! 5. Your equity returns is the sum of dividend yields (say 3%), future growth (say 10% including inflation), and a future change in the price earning ratio. The first figure is known, the second figure is estimated and the third figure is what people spend their life times guessing. Do not do that. Nobody, nobody, really nobody has been able to say ‘how the public perception of value will change’. Take it as it goes, that is all.
Posted on: Sat, 06 Jul 2013 11:13:41 +0000
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