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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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A financial plan on an index card

Posted by Muthu on December 27, 2015

Thanks to Ron Beaubien (https://twitter.com/RonBeaubien). He has retweeted a tweet from The Motley Fool (https://twitter.com/themotleyfool/status/629677515200679936).

They have provided a financial plan concisely in an index card. I liked it and thought of sharing the same with you.

1)Work in a job that genuinely excites you when you wake up in the morning.

2) Makes sure your material aspirations grow slower than your income. It’s the only way to accumulate wealth.

3) Pay no attention to the Joneses. They’re crying inside.

4) Avoid debt even if you can afford it. It takes away options, which is your most valuable asset.

5) Save enough of your income so you can retire at the age your dad started complaining about his back hurting. You won’t want to work after that.

6) Invest in diverse portfolio of stocks, with the intention of staying invested for decades.

7) Dollar cost average (which means SIP) for your entire life and you won’t care what the market is doing.

8) Have enough cash to ensure you’re never forced to sell stocks at inopportune times.

9) When in doubt, choose the investment with the lowest fee.

10) Check your brokerage account as infrequently as it takes to prevent rash decisions.

11) Accept that the future will pay out differently than you think it will.

One Response to “A financial plan on an index card”

  1. rakesh ojha said

    Sensex since 1999 has compounded at the annual rate of about 12-13% which is much less than 17-18% you are quoting. Sensex compounded much faster prior to 1995 probably because extraordinarily cheap levels of Sensex at 100 in 1979 giving a very low base. 15 year rolling Sensex CAGR was stunning 27% in 1994, 24% in 1995, 22% in 1996, 20% in 1997, 1998, 1999, 2000 then dropping to 13-15% from 2001 to 2006, 8% in 2007 (base effect of 1992 top), 14% in 2008, only 6% in 2009 due to crash, 12% in 2010-2012. I am quoting from one of the presentations from Prashant Jain of HDFC MF. All this gives 17-18% CAGR from 1979 but it is due to positive base effect. I think future returns from Indian market may be lower as you have much higher valuations these days with high PE (unless you buy during a crash like in 2008/2009 giving yourself a low base). One reason for high valuation last decade is extraordinary FII interest in Indian stocks. We are right now darling of the world but prior to 1992, we were closed to the world and we had very low PE/valuation. Another reason for lower return in future would be lower inflation in new RBI monetary regime of inflation targeting blessed by the govt. In nominal return=GDP+ inflation, inflation would be lower. Therefore I think you must lower your future expectations from the market as high valuations these days become headwind rather than a tailwind in past. Thanks.
    PS.I however agree with much of what you say.
    A timely artcilce showing PE clos3 to 20+/- vs in the range of 12-15 15-20 years ago leaving kittle scope for 18% CAGR returns.

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