Becoming Who You Are

Money is like a drug. When we become addicted to work for money then it will be very difficult to change that habit (rather than an addiction). We get happy when we have money and upset when do not have it. And it is a reason why we cannot shift to the B and I quadrant easily.

An “E” works for the system.

An “S” is a system.

A “B” creates, owns, and controls the system.

An “I” invest money into the system.

Money addiction creates a fear within us. whereas our passion helps us to build a business, not our fear.

Many times, during a recession, hits the economy, few of the companies decide to cut employees’ strength and due to this decision, lower-level employees have to face major prices. So, seeking security becomes riskier. While this kind of fear does not chase B and I quadrant people. They work on improving the system, enhancing the system, and improving their financial knowledge.

Many of us trained with fears since our childhood which has created difficulties with change quadrant. When we want to achieve a bigger success then we need to have a faster processing time with higher accuracy. We can go how much fast, we want. But need to remember one thing is never taking a shortcut. Shortcuts will not lead us towards results but it will trap us in midways. Financial intelligence, not an emotional decision, and focus on numbers always help to achieve our financial goals.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

I am grateful to Mr.Meihol Jhaveri (Founder of Gatisofttech) for the development of the Lucky Idiot website.

WHY THE LAST COOKIE IN THE JAR MAKES YOUR MOUTH WATER Scarcity Error

When we see that something is different, unique, and having a shortage then we love to own it. That things attract us and we see them as more valuable than others. Rare is valuable. The scarcity error is as old as mankind.

We need to assess products and services solely based on their price and benefits. It should be of no importance if an item is disappearing fast, nor if others are also interested to buy it.

Business – Many business houses try to attract customers by creating a scarcity of their products. They show the availability of only a limited number of products which forces customers to make any impulsive decisions. When we make an impulsive decision then we scarify rational thinking. 

Investment – Few listed businesses are unique, different than others, well managed. Such businesses are few so People are attracted towards such businesses and suddenly those become more valuable and started trading at a higher valuation. This is what we have experienced about the quality companies in the recent stock market cycle.

Many times, businesses getting premium as an only listed company on the bourse but that should not be the only reason to invest in a company or to give a higher premium to the business. People mostly fear missing out (FOMO) particular opportunity and run behind it, so that float available for a particular stock starts reducing and demand for it starts increasing which will increase the price of a stock.

We should check whether the company has fundamental value compared to the price commanding on the bourse. If the company is not fundamentally stronger then it is no right way to chase uniqueness of business or only listed company or low shares floating in the market. We should have well-defined philosophy to invest in businesses and if the stock does not fall under it then we must avoid it. Also, we should not take a speedy decision, speedy decisions can be harmful. We are not going to miss any opportunity, the market has thrown opportunities before our birth and also going to throw after our death. We remain or not, opportunities in the market always are there to serve.

This entire series will be review with various examples from books which are Thinking, Fast and Slow and The Art of Thinking Clearly.

10 – Current temptation, future frustration

The tenth part of the Series is “Current temptation, future frustration”. This series is based on the companies which are currently darling of the market and many trying to catch such opportunities but it has a probability to become a reason for future frustration. It can wipe out the majority of gains in wealth. I am trying to put some of the number-crunching facts by which we can identify ongoing issues in the companies and can be saved our wealth.

I am starting this article with one of the company which is engaged in the business of trading has a 52 weeks low price of Rs.9.60 and LTP is Rs.62.2, a 52-week high of Rs.79.2. This company has rewarded ~6.48x of return in a year.

Let’s start looking at the numbers.

We can see that the company has high volatile sales, OP Margin% and not earning profits.  

We can see that higher receivable days and payable days where we can say that almost 3 years of receivables and a year of payable. Shocking…..

The major balance sheet item is advance recoverable and for that, there is no provision made by the company.

The company does not have a good return ratio.

When we look at the shareholding pattern then promoters hold only 6.89% now and the remaining hold by the public. If the promoters have trust in the performance of the company then they have to hold higher holding.

This entire series is based on past available data and ignored the future development in companies and the stock market always looks at the future.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.

This series contains learning from books –

Financial Shenanigans

Quality of Earnings

The Financial Numbers Game

Creative Cash Flow Reporting

You Cannot See Money with Your eyes

If we see some tempting offer then we must have to be suspicious. There is no free lunch available.

We have to analyze various aspects before making any investment. We may make mistakes and mistakes are essential to learning about and correcting them for better growth.

People make an investment with emotion rather than with mind which led to losing money by a majority of people. At last, they become a dreamer, speculator, or broke down. When someone told us about a good deal and earning good in the future then our emotional bias comes into the picture and become greedy as well. This emotion stops us from making wise decisions.

If we want to be successful in the B and I quadrant then we have to train our mind that we can observe what others used to ignore. We can start by getting more about financial literacy. Our ability to create more money will bring more money for us. This education helps us with taking proper steps and investing becomes less risky for us. Education will help us to differentiate between good and bad advice.

Also, when we know about investing, we or our advisors choose to provide us higher yield with a less risky avenue.

We need to understand that when we buy any property on a mortgage then that’s not our assets rather than its and assets of a bank. It will fall under the liability side of the balance sheet. When we fail to make payment on time, the bank will take over that property from us. Taking debt is not always bad but if we take personal debt then it must be small. And if we go for a huge dent then someone working for paying it. That’s means business debt.

As we have learned in the series of rich dad poor dad that we consider assets to only be those properties that generate a cash inflow to us. All other properties are considered as our liabilities.

Now, comes to savings and deposits then yes those are not taking any cash flow out from us so that is our first level of assets.

Many of us spending our life on the opinion of others rather to focus on the fact. We should only trust facts nothing else.

When it comes to money, most people are either lazy or searching for shortcuts, so they don’t do enough due diligence. And there are still others who are so afraid of making mistakes that all they do is due diligence and then do nothing.  Too much due diligence is also called ‘analysis paralysis.’ The majority cannot become financially free because they live in debt till die. So, this will not bring freedom for them.

Read for more detail: Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom

I am grateful to Mr.Meihol Jhaveri (Founder of Gatisofttech) for the development of the Lucky Idiot website.

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