Short Takes Archives - Page 2 of 2

Everything Compounds – “The Compound Effect” by Darren Hardy

Srikanth Meenakshi March 1, 2021 1 Comment

I picked up this book thinking that it would be an in-depth thesis on the power of compounding in financial investments. But it turned out to be more than that, and the better for it.

“The Compound Effect” by Darren Hardy explores the power of compounding in our everyday lives – our habits, our goals, our routines, our successes, and failures. The central premise of this book is simple enough – “Everything compounds. It is up to us to choose the direction that it happens in our lives”.

It is a motivational book, no doubt. I am not a keen fan of this genre of books, but when I started reading the book, I could not stop – even after realizing that the thesis had little to do with personal finance.

Hardy starts off with explaining the power of compounding in our lives with examples, and shows the readers methods, tools, and techniques to follow to harness this power to become better versions of ourselves.

The book is peppered with great anecdotes (some of which are well-known) and motivating quotes (some of which are a bit cliched). The one quote I liked had a bit of a Gandhian vibe – “Don’t wish it were easier; wish you were better”.

But it’s hard to agree with the exhortations of the author 100% – especially in places where he advocates using these methods in our personal and family relationships (have a weekly ‘relationship review’? Seriously?). However, bulk of the book is quite immediately usable and could serve as a guide to streamlining of day-to-day routines and habits to re-orient ourselves in the right direction.

The foundational thesis is that if we have a plan to make a small degree of improvement in the right direction and persist with it over the long-term, miraculous things could happen. A bit of ‘Kaizen’ for our everyday lives, I suppose.

The first two chapters lay the foundation – about the choices we make in life (and take responsibility for) and the habits that make us who we are. The next two chapters – on momentum and influences were very interesting and (for me) eye-opening. The last chapter on acceleration seemed a bit overbearing, though. The book also comes with a companion website which provides tools and templates that we can use to adopt the methods prescribed in the book.

At times the author comes off like that over-enthu, hyper-fit fitness trainer who keeps saying that you too can get a six-pack if you follow his instructions. But, as we know, even if we don’t get the six-pack, we would at least get fitter and healthier if we follow the routines he prescribes. It’s the same with this book as well.

In the earlier book that I wrote about – The Psychology of Money – Morgan Housel mentioned that compounding is really a hard concept for human brains to get a grip on due to its astounding ability to deliver growth (or de-growth) of outlandish magnitude. This book, if not anything else, would help us to internalize the concept by relating it to our regular lives.

All in all, an interesting, short read – one that we can dip into whenever we need a jolt of positive energy.

The Compound Effect in Amazon

(Not an affiliate link)

Psychology of Money: What we think about when we think about money

Srikanth Meenakshi February 26, 2021 2 Comments

Most best-selling books on investing and personal finance are from the west (mostly US). With such publications, readers in India will need to do some sifting through and quite a bit of mental arithmetic before deriving value from the book.

Rarely does a book come along that is readily accessible and relevant to the Indian audience. “The Psychology of Money” by Morgan Housel is one such book. I heartily recommend it.

Morgan distils the enduring wisdom about the relationship between people and their money in 20 chapters. Some of these chapters are about stocks and the market, but most of them are about people – about the games they play with money.

Each of these chapters can, as the author notes, be read individually as well. But they are not disjoint essays. Each essay pushes the narrative farther, and helps the reader to get a fulsome understanding of how the relationship with money works for people – all the misconceptions about money and wealth and all the traps and pitfalls investors land themselves in time and again.

That said, this book is definitely not a litany of “don’ts”. For every single admonition that the author makes, he points to the right way as well.

The concepts themselves are simple and time-tested – the role of luck in investing, why timing the market will not work over long periods of time, importance of patience, the right way to do planning and more.

But Morgan writes about them with a straightforward clarity and with persuasive arguments, and always keeps it interesting. To illustrate the power of compounding, he goes all the way to the geology of ice ages. To show the power and importance of luck, he cites an example from the early life of Bill Gates. And he uses examples from his own youth to tell readers about how people perceive being rich.

The most important point that the author makes is about why one should strive to build wealth – why one should save and invest. If one reads the book and takes that single point to heart, it would have served its purpose.

I would recommend the book especially to young people – the sooner they understand these points, the better the rest of their lives would be.

The book is definitely worth the time and effort (It is neither long – 240 pages, nor expensive Rs 285). However, if you don’t want to spend the time/money to get the book, you can read a synopsis of the book here in Morgan Housel’s website.

Link to the book

(not an affiliate link)

Where to invest your Franklin debt fund proceeds?

Vidya Bala February 16, 2021 No Comments

You would have started getting the locked money from 5 of the 6 debt schemes of Franklin India Mutual after a stressful 10 months. Now that the money has started flowing in, where should you invest?

After all the hassle, you would likely not be in a mood to park it in any risky asset – for a while at least. So, FDs may be your natural choice and rightly so.

All FD investment

Where capital preservation scores over everything else, do not scout for options. Simply opt for bank FDs of large banks. But broadly, at this juncture, locking into FDs would mean entering at very low rates. So, if you do enter FDs, remember to enter for shorter periods of 6 months to 1 year and lock in later for longer periods when rates go up. You could go with your bank or check other FD options in our deposits section.

If your amount is large and you wish to build a portfolio, then consider using the options below. Some of them will have debt funds that you can opt for or choose to ignore.

#1 Income need

If you are a senior citizen and in need of income, it is best to stick to traditional options. Please check our retire income portfolio that has a mix of FDs and govt. schemes. https://staging.primeinvestor.in/portfolio-life-situation-retiree/

For others (not senior citizens) who depend on income from your corpus please check our income portfolio https://staging.primeinvestor.in/portfolios-need-based/ but make sure you have some liquidity by parking in short-term FDs.

#2 Liquidity need

If liquidity is a priority for you, then lock some amount into short-term FDs of 3-6 months and the rest in highly liquid and low risk debt funds. Our emergency portfolio will fit this bill. https://staging.primeinvestor.in/portfolios-need-based/

#3 Asset allocation need

If your Franklin proceeds were used as part of an asset allocated portfolio, and you still have faith in debt funds, then you can consider low risk funds. Check out our very short and short and medium duration funds listed in Prime Funds. These categories will readjust to the higher rate scenario (there will be some volatility for few months) and will settle to benefit from higher coupon in the new instruments they will add over time. Choose the category appropriate to your time frame.

Also read : A low risk mutual fund option for the conservative equity investor

Welcome to Prime takes – Short-takes on assorted things

Srikanth Meenakshi February 16, 2021 2 Comments

We’re happy to get started with a new, experimental section in the PrimeInvestor platform. We are calling it ‘Prime Takes’ – short essays published in an ad-hoc fashion (meaning, whenever we feel like 🙂 ) about things we find interesting.

You can access these by going to https://staging.primeinvestor.in/short-takes

Please note:

There will be no specific email notifications about these essays. However, we will include them in our digest mail on the weekends.
These will not be in-depth research articles – they will be opinion pieces (i.e not really recommendations) or observations about markets and personal finance that we think are worth sharing, but not quite worth a detailed write-up
There is no set schedule for these articles

The rest – we’ll figure out as we go along! 🙂

Prime Takes