Philosophies of Investments

Personal finance is not just about numbers. It is about philosophies, principles, and a lot of discipline. In this piece I will be discussing ten such philosophies that are the crux of my investment psychology. These philosophies are not all my own, nor taken from one particular individual. These are a cumulation of different ideologies and people I came across in this journey.

Philosophy 1 – Infer the meaning for your own self
When you read something, don’t just read it superficially, infer its meaning for your own self and see how it applies to your life. Every piece of art is built in layers, and it appeals to different people in different ways. Find the layer that applies to you. In personal finance and investment too, you will come across many books, philosophies and ideas. Try to find points that apply to your own situation.

Philosophy 2 – Be patient
I came across this anecdote about Warren Buffet recently. Today, we know him as the most successful investor of our time. However, 96% of Warren Buffet’s net worth came after he turned 65 years old. Buffet’s expertise is investing but his secret is time. He started investing at age 11. That’s the power of playing the long-term game. Give your investments some time to mature.

Philosophy 3 – Accept luck
Destiny has a part to play. Just like in life, in investments too there would be days when you’ll receive more than you expected and days when you’ll have to cut loses. Don’t resent. Every outcome in life is influenced by forces outside of our efforts. So, acknowledge the fact that not all success is driven by hard work, and not every failure comes from incompetence.

Philosophy 4 – Manage desire vs fear
Fear and desire will make you take extreme steps in life if they control your mind. Be cognizant of the fact that not every crash is as grave as it first appears. And there’s a difference between things you want and things you need. As long as your wants and fears are in check you are fine, as they unknowingly can lead you into life’s biggest traps.

Philosophy 5 – Develop a financial IQ
Developing a financial IQ will teach you how to monetize your skills and talent. The world has many talented poor people. Learning how to build wealth is a skill that everyone should learn. Financial IQ boils down to four things – understanding basic accounts, planned investments, spotting trends and knowing taxation.

Philosophy 6 – Response to failures
Risk appetite is talked a lot about in the world of finance. It is related to your ability to respond to failures. If failure inspires you to win, then you can consider the plunge. But if failure petrifies you then playing safe makes more sense. As you move on in life your situations will change and influence your ability to take risks. There is no dishonor being either way as long as you are aware of your tendencies to failure.

Philosophy 7 – FIRE (Financially Independent Retire Early)
I have heard people talk about early retirement and living rest of their life freely. I disagree with this notion. It’s not realistic. I enjoy my work and it’s not for the things I do at work. It’s because my work gives me an identity. It keeps my mind occupied, lets me socialize and live a decent life. Having to go to work, bitch to people about it keeps me relevant in the world. I think what people who promote the FIRE philosophy essentially mean is an escape to their mundane jobs. More than when you want to escape, what is important is what you want to escape to. Just having enough money for early retirement doesn’t mean you’ll have a fulfilling life.

Philosophy 8 – Play your own game
The biggest recommendation in personal finance is to not take anyone’s recommendation. It is because everyone out there is playing a different game. Everyone’s goals are different, their timelines are different, risk appetites and response to situations are different. And while we see their fancy lifestyle, we don’t have access to their fears, insecurities and pressures. So, play your own game.

Philosophy 9 – Donate
Donate now. Donate whenever possible. If there was one message across all the finance text and interviews, it was about donating. Donate selflessly. Life will find a way to return every penny you give. If we are hesitant to donate even one percent of our annual income, then society has failed to raise people who think beyond themselves and we are further failing the society even more.

Philosophy 10 – Just keep doing
It doesn’t matter if you are smart or dumb, in a good mood or bad, having favorable or unfavorable conditions; what really matters is do you have the consistency and courage to make the possibility into a reality. Just keep doing your thing consistently. Personal finance is about discipline and persistence. It’s like the woodpecker bird who keeps chipping the stone with its tiny beak thinking nothing is happening, until one fine day when the stone breaks and reveals the diamond within.

I hope you found this Learning Investment series value add. Feel free to send me your feedback, and I thank you for reading and staying with me until here. I wish you ample wealth, luck and prosperity!

Link to the first part – Learning Investments

Acknowledgements – 

• Nick Maggiulli – https://ofdollarsanddata.com/ (Author of Just Keep Buying)
• Collaborative Fund https://collabfund.com/blog/
• Morgan Housel (Author of The Psychology of Money)
• Robert Kiyosaki (Author of Rich Dad Poor Dad)
• Podcast: Joe Rogan and Naval Ravikant https://www.youtube.com/watch?v=3qHkcs3kG44
• Ankur Warikoo https://www.youtube.com/watch?v=9yMg2RZE0Gc