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On Investing and Wealthy Life

With the Neolithic Revolution, around 12,000 years ago, several nomadic bands shifted from being hunter-gatherers to larger agrarian settlements. Along with this shift, communities started to establish private property rights, as well store and exchange value. The latter one brought us to invent money, turn it into a virtual value and speculate based on ignorance and emotions.

With the rise of globalisation and consumerism, money became the central part of our lives. Moving from just being an exchange tool, money turned into an addiction. We can see it in financial markets. People are losing their minds over gambling in trading markets. Nonetheless, when done correctly investing brings us a financial independence, which frees us from many non-value-adding troubles.

“In your actions, don’t procrastinate. In your conversations, don’t confuse. In your thoughts, don’t wander. In your soul, don’t be passive or aggressive. In your life, don’t be all about business.”

Marcus Aurelius

Assuming we do understand that the best way we can see the meaning in living is by creating one, we keep on improving ourselves to be the better one than who we previously were. Never fully satisfied, we should persevere on our passion and enjoy the experience, with all the pain and suffering of it. Perseverance is our mind skill to delay the gratification, self-criticise, self-regulate and train our emotional strength for the sake of a greater purpose – following our passion, the only meaningful thing to do within our life span. This can be the single most important formula for success, as well as getting rich.

There are unlimited amount of books, articles, studies and opinions on investing. One group suggest to focus on long-term investment, whereas the other one suggests on learning to trade in short-term and gaining upper hands by understand the rules of the game and do arbitrage. I am fan of the former suggestion due to the fact that I have other priorities to focus on than money.

“The true investor … is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits [him], and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines … is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if … stocks had no market quotation after all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment”

Benjamin Graham

The reasons I suggest investing comes from the very simple fact – we are losing money if we are not investing. While the monetary value of most assets has appreciated over time, our purchasing power has not managed to catch up with it. You may say that the salaries have increased as well. Yeah, but did so inflation. So, if you kept your money at your home or in bank (like me), most like you have lost part of it over the long-term, even if the digits you see in your account does not tell you so. So, we need to find a better way to use the money we have earned to keep its value over time, if not appreciate.

When you want to lose weight, there is a very simple rule: burn more calories than you take in. There is a similar rule in investing towards getting to financial independence as well: save more than you spend. It does not matter if the market rate of return is 5% or 50% unless you have anything to invest. Saving helps us keep our priorities by preventing us from having “I wish I had” like sentences and by enabling us to have the luxury of making our best-for-me choices. Although this rule is very simple, it is definitely not an easy one. The consumerist behavior has blurred our perception on what we need and what we want.

“If you can make money remaining honest, trustworthy, and dignified, by all means do it. But you don’t have to make money if you have to compromise your integrity.”

Epictetus

Investment market is very tricky and can be a trap for many innocent ones. Money activates a reward mechanism that triggers the area called ventral striatum of the basal ganglia in our brain. We hope that investing is going to make us very rich and most of the times this hope ends with a disappointment, if not a disaster. Main reason for this disappointment is that we are trying to create an expectation about an uncertain future that is in no means under our control, and we do it without thinking of other scenarios that potentially could happen (and eventually does happen).

There are only few main rules that makes sense to me in investing:

  • Save as much as I can. There is no another way.
  • I cannot beat the market in long-term. and it’s not worth speculating in a short term.
  • Individual assets can die in a long term, but market will stay alive. So, invest in the market.
  • Investment plan is just a small part of my financial plan, which is in return a part of my life plan. Therefore, it should not take too much effort.
  • It’s simple, but not easy. So, learn the rules of the game and start playing. Just do it.
  • Nothing is risk-free. So, be aware that all of it can be lost. Diversifying helps a bit.

Making money is a good practice as long as it does not distract us from the more important purposes. It helps to gain financial independence to pursue the values that money itself cannot provide directly. Here is the caveat: Real wealth is not gained by accumulating money. Actually it is the complete opposite: ignoring money and other material assets. Wealthy life is the one where passion and vision are the only things being pursued after. As money can ease the process by taking some of the trivial blockers out of the way, investing is our strength.


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