Get Rich Secrets | Value Research If you want to invest profitably and safely, what you don’t do with your money could be more important than what you do...
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Get Rich Secrets

If you want to invest profitably and safely, what you don’t do with your money could be more important than what you do...

The lament that people, by and large, do not know what to do with money is extremely common. Government regulators, the media, frequently point out that the lack of financial literacy is widespread, and that few people manage to make optimum use of their savings and investments. It is generally assumed that this financial literacy must take the form of knowing what to do with money. That much seems obvious. However, this may not be true. When we observe the actual ways in which a good proportion of people are actually mismanaging their savings, then it seems that the problem lies elsewhere. It’s not so much that they don’t know what to do with their money, but that they don’t know what not to do with it!

Knowing what not to do with money is not just the inverse of knowing what to do with it. It’s an entirely different type of financial literacy and we think it’s far more important than the other kind. Today, everything that comes under the term ‘financial literacy’ boils down to teaching savers where to invest in. They are told how the investment world works, what the different types of investments are, who they are useful for, how to fit them into their financial needs and so on and so forth. There’s nothing wrong with this by itself. It’s all good, useful and sincere stuff and there’s no doubt that every saver must understand it thoroughly. However, factors such as risk associated with investing and the need for a suitable time frame with investments are completely missed out or ignored.

Unfortunately, none of this is actually of much help in helping savers avoid situations where they actually go wrong. That happens when someone tries to hawk bad financial products dressed up as good ones and savers can’t recognise, because they are not equipped to realise what’s happening. And if you are in the market for financial products, then sooner rather than later, someone does exactly that. There’s an old saying that bad money always drives out good money.

The modern version of it is that bad financial products always drive out good ones. Why so? It is because bad financial products always make more money for their sellers and less for the buyers. The result is that there are always more resources available for the sales and marketing effort that goes into bad products. They are advertised and promoted more intensively, more salesmen can be dedicated to them and the salesmen can spend more time and effort over each potential victim. Liberal use of jargon adds to the credibility of the seller knowing a lot more of the product than the buyer. The end result; bad products always occupy all the mind-space available and push out the good products.

Think wisely
So why isn’t it that teaching people what not to do doesn’t seem to come under the purview of financial literacy? We think the problem is that existing channels of financial education are committed to not being critical of anything. They’d like to be polite and not step on any toes, especially the commercially-powerful ones. Their modus operandi is not to tell people what’s good and what’s bad. Instead, they’ll talk only about the good things and keep quiet about the bad ones. That’s only half the job done and the less important half at that.

This makes the whole exercise pretty much useless in this very important way. For the investor, not doing the wrong things should actually be learnt before doing the right things. There is no one more interested in helping you with your finances than your own self. Unfortunately, this is something that they’re likely to learn the hard way, through their own experiences.

The 7 Secrets of Successful Investors
Experienced investors gradually realise that successful investing is not about winning, it’s about not losing. Successful investing is about developing a process to improve your chances of a good investment experience and avoiding poor investment experiences. To be successful with investments, follow the seven secrets to get rich.
• Working with a plan: Hoarding money in a savings account can be a deadly financial sin, akin to gluttony, because it represents an unrestrained desire for an asset that isn’t being put to its best use. Have a plan before you start investing.
• Diversify: Putting all eggs in the same basket is risky. Spread your money across different financial investments to reduce the chances of losing it all and reduce the fluctuations of investment returns without sacrificing too much potential gain.
• Understand risk and return: There is no such thing as free lunch, and there is no risk free investment that provides high returns. Different funds suit different investor needs and goals. Use the ‘Fund Select’ feature on our website to shortlist the best funds across categories.
• Have an investment horizon: There is no right or wrong time to invest. When it comes to investing, time is your friend and impulse is your enemy.
• Cut out emotions: There is no point hanging on to laggard funds just because you are unable to come out of them emotionally.
• Taking risks: Taking risks could be beneficial; allocate money to a fun portfolio, where greed knows no bounds to trade, bet on lottery and speculate on thematic funds as long as your other financial goals are not being compromised.
• Review and analyse: It is sinful to build a fund portfolio of too many funds. Having a few funds in a well-diversified portfolio provides the convenience of easy tracking and managing of investments.

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